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AI chip stocks face turbulence as investors expect slower hyperscaler capex
UBS estimates hyperscalers' capex will rise 76% to $673 billion this year, then slow sharply to 25% growth next year and 6% in 2028.
The sharp rally in AI chipmakers has hit turbulence as investors weigh whether valuations can hold up if the hyperscalers that fund AI infrastructure slow their spending growth, Reuters reports.
UBS estimates that hyperscalers' capital expenditures will increase 76% this year to $673 billion, but only 25% next year and 6% in 2028. Some active managers have already trimmed exposure to chip stocks, adding shares of hyperscalers that have lagged the chipmakers' surge, and shifting toward software and other sectors they expect to benefit from AI adoption, including financials and healthcare.
Edmond de Rothschild Asset Management's Alexis Bossard said that once hyperscalers stop increasing capex, it would be a relief for the buyers of AI infrastructure but a negative signal for the semiconductor industry. Reuters also cites a Philadelphia Semiconductor Index that has more than doubled over the past year, despite a near-18% pullback from its June peak.
Bank of America’s July fund manager survey found 82% of respondents view semiconductors as the most crowded trade, and none reported being short the sector. Reuters adds that other managers have reduced positions in memory-chip and equipment makers while building exposure to hyperscalers and healthcare, including using put options on selected semiconductor names.