By Jonathan Cassell, Lead Analyst of Supplyframe Commodity IQ
Despite rising concerns about the longevity of the artificial intelligence boom, recent signs indicate that the AI spending spree is likely to continue and remain the dominant factor driving electronics supply chain dynamics in 2025.
In the most recent round of positive developments, executives from key players in late April said the construction of AI data centers remains on track.
“We haven’t seen a pullback,” said Josh Parker, senior director of corporate sustainability for AI chip leader Nvidia.
“There’s been really no significant change,” added Kevin Miller, vice president of global data centers, at leading hyperscaler Amazon. “We continue to see very strong demand, and we’re looking both in the next couple of years as well as long term and seeing the numbers only going up.”
The positive comments regarding AI growth come after a wave of pessimism that cast doubt on the market outlook. The arrival of DeepSeek’s new AI model, which apparently requires far less compute horsepower than existing models, prompted many to question whether hyperscalers’ and enterprises’ massive expenditures on AI data centers were justified.
Furthermore, rumors circulated in February that Microsoft and other hyperscalers were cutting their AI capital spending plans. However, the company refuted that claim, stating that it still aims to spend more than $80 billion on AI data centers during its fiscal year, which ends in June.
Since then, market participants have expressed positive sentiment.
In March, Nvidia CEO Jensen Huang stated that the new wave of agentic AI technology will require massive quantities of additional computing power. This rise in computing requirements is expected to drive data center capital spending to exceed $1 trillion by 2028, nearly tripling the total from 2024. Huang noted that Nvidia had already sold 3.6 million of its new Blackwell AI GPUs to the top four U.S. cloud service providers this year, up from 1.3 million of its older Hopper chips in 2024.
Most recently, hyperscaler Alphabet (Google) announced in April that its revenue increased by 12% year-over-year in Q1 2025. The company attributed the growth to its AI products, including the new Gemini 2.5 model, as well as its AI-enhanced search.
So far in 2025, AI demand has continued to generate demand growth. The Supplyframe Commodity IQ Demand Indexes for memory, microprocessors, capacitors, and optoelectronics all rose in Q1 compared to Q4 2024, partly due to increasing sales to the data center and AI market. While tariff-driven order frontloading contributed to the increase, much of the growth was also driven by genuine demand for AI data center-related components.
In 2024, the AI boom led to bifurcated demand conditions for buyers. AI-related chips such as high-end memories and GPUs experienced inflated pricing and supply limitations. However, other devices enjoyed relatively easy availability due to weak sales in end markets, including smartphones and PCs. With AI growth still on track, this year could bring a similar phenomenon, with AI continuing to dictate demand trends for the year.