Multiple tech giants, including Microsoft (MSFT), Nvidia (NVDA), Meta Platforms (META), and Palantir (PLTR), have recently seen sharp declines in their stock prices. In response to this situation, investment bank Wedbush has described the current market as entering a “foggy zone,” asserting that this perplexing pattern of reversals keeps recurring, while simultaneously emphasizing that opportunities are emerging. Goldman Sachs holds a similar view, pointing out that against the backdrop of sustained volatility in chip stocks, large-cap tech stocks may be becoming a more attractive allocation direction within the AI investment theme.
Wedbush analysis suggests that investor worries over continuously climbing capital expenditures and rising computing and storage costs are the primary factors driving the current pullback in tech stocks. This year’s massive $700 billion in capital expenditure by tech giants is largely directed toward AI infrastructure construction, but shareholders of Microsoft and Meta are growing increasingly frustrated. Wedbush noted in its report that the market is in a six-to-twelve-month window during which data center and computing power construction is advancing rapidly, while major tech companies such as Microsoft, Meta, Amazon (AMZN), and Google (GOOGL) are still waiting for the wave of growth and commercial monetization to arrive. This predicament has affected all hyperscale cloud service providers; even Google, regarded as the “golden boy” just a few weeks ago, has recently seen investor anxiety exacerbated by the departure of multiple AI researchers. Meanwhile, Meta is at a critical juncture in its transformation, but the enormous investments have yet to yield tangible results, and investor patience is wearing thin. Apple’s substantial price hikes on its products this week have also prompted market reflection on whether computing and storage costs have become unsustainably high. However, Wedbush expects these costs to gradually decline over the next year, and as AI consumer-grade hardware, physical AI, and enterprise-level applications surge, current concerns will ultimately prove to be part of a long-term value creation process, much like the construction of the Las Vegas Strip in the 1950s. The firm believes that the current market mismatch precisely creates opportunities for investors to position themselves in the true long-term growth winners within the tech and AI bull market.
Goldman Sachs strategist Christian Mueller-Glissmann stated that although chip manufacturers and beneficiaries of AI capital spending were previously the primary drivers of market gains, the chip sector is also the most volatile segment of the AI supply chain, with concentrated investor positions and leveraged accumulation through ETFs and options. He believes that if one is bullish on the AI development trend, it is advisable to appropriately diversify allocations toward hyperscale cloud computing companies while reducing the allocation proportion in the chip sector. Over the past year, the Philadelphia Semiconductor Index (SOX) has risen approximately 150%, while hyperscale players such as Amazon, Oracle (ORCL), Microsoft, Google, and Meta have lagged behind. Goldman Sachs’s risk appetite indicator has recently continued to rise, driven by earnings improvements fueled by AI capital expenditure and the reopening of the Strait of Hormuz, pushing the market into a “Goldilocks zone” of declining inflation expectations and robust earnings growth. But Mueller-Glissmann warned that when everyone is bullish, the risk of a market pullback is also accumulating.
Dan Niles, a renowned semiconductor analyst from the dot-com bubble era, warned that the AI trade is about to hit a “speed bump,” arguing that capital should flow to the chip industry, which is the actual recipient of AI spending, rather than to hyperscale cloud computing companies. He pointed out that corporate AI strategies are shifting from “Token Maximization” to “Token Minimization,” as companies realize they cannot exhaust their annual budgets in the short term. Niles expects June-quarter results to remain strong, but September-quarter guidance may face pressure. He has gradually reduced his allocations to hyperscale cloud companies and certain semiconductor names, emphasizing that investors need to be more selective. Columbia Threadneedle Investments, however, holds a different view, asserting that companies related to AI infrastructure spending remain in a strong growth cycle, with revenue and earnings expectations continuing to be revised upward, and that the tech stock rally is likely to extend over the next several quarters.
