Investors are preparing for a slowdown in AI spending growth, with some cutting exposure to chip stocks and adding shares of hyperscalers. The parabolic rally in AI chipmakers has run into turbulence amid concern about valuations and the sustainability of their bumper revenues.
Slowing Spending Growth
According to UBS, hyperscalers’ capex will rise 76% this year to $673 billion, but will increase by only 25% next year and just 6% in 2028. Some active managers have already cut their exposure to chip stocks and are adding shares of hyperscalers themselves, which have sharply lagged the rally in chipmakers.
Bank of America’s July fund manager survey found 82% viewed semiconductors as the most crowded trade and none reported being short the sector. The question arises over how to position if AI spending remains strong, but no longer accelerates fast enough to support the expectations embedded across the AI infrastructure trade.
Investor Strategies
Alexis Bossard, global equity portfolio manager at Edmond de Rothschild Asset Management, has increased exposure to Amazon and favours areas such as liquid cooling, cybersecurity and selected software firms. LFG+ZEST CIO Alberto Conca has sharply cut positions in memory-chip and equipment makers, while building positions in hyperscalers and healthcare stocks.
After funding the initial AI buildout through their own cash, hyperscalers are increasingly turning to external financing, prompting questions over whether capital-market pressures may eventually constrain spending growth. The corporate debt market has absorbed billions in Big Tech issuance this year and investors have, until recently, lapped it up.
Madeleine Ronner, senior portfolio manager at DWS, expects earnings-season commentary from hyperscalers to remain supportive of further investment. Growing local opposition to U.S. data centers could also stall spending growth, with Empirical estimating about 70% of projects face some degree of pushback.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
