Which companies does the analyst recommend buying and avoiding?

Buy list: Nvidia, Broadcom, Micron, AMD, and Dell. Hold list (avoid until monetization is clear): Microsoft, Oracle, and Google.

Why are hyperscalers losing money on AI spending?

Reitzes argues they do not generate cash, may not generate cash next year, and do not buy back stock. Microsoft's CapEx surged to $30.88 billion（約4.9兆円） up 84.4% year over year, while Alphabet's free cash flow fell 46.6% year over year to $10.12 billion（約1.6兆円）, despite both posting strong AI revenue.

What are the next key signals to watch?

Hyperscaler July earnings, where CapEx guidance and AI revenue disclosures will determine whether the gap between chip makers and cloud giants continues to widen.

Back to articles

Analyst urges buying chip stocks on weakness while avoiding hyperscalers until their AI spending translates to profit.

Yahoo Finance AI8h ago3 min read

Key takeaway

A prominent tech analyst is recommending investors buy semiconductor stocks on dips while avoiding large cloud providers until they prove AI spending translates to sustainable profits. The shift reflects a debate over who profits from AI: chip suppliers seeing strong revenue growth, or hyperscalers burning cash on infrastructure without yet-proven returns.

Summaries like this, in your inbox every morning.

3 Key Points

What happened
Melius Research's Ben Reitzes told CNBC to buy semiconductor stocks—Nvidia, Broadcom, Micron, AMD, and Dell—citing their strong earnings and revenue growth tied to AI demand. He recommends holding Microsoft, Oracle, and Google until their AI revenue models become clearer, given their massive capital expenditure without yet-proven cash generation.
Why it matters
The debate has shifted from whether AI demand exists to whether companies spending heavily on it will earn money back. Reitzes argues the real profit lies with compute suppliers rather than the cloud giants paying for buildout. Hyperscalers are handing cash to chip makers while their own free cash flow is declining—Microsoft's CapEx surged to $30.88 billion（約4.9兆円） year-over-year, yet the stock is down 23.7% year to date; Alphabet's free cash flow fell 46.6% year over year despite $35.67 billion（約5.7兆円） in CapEx.
What to watch
Hyperscaler July earnings will be the next checkpoint, where CapEx guidance and any AI revenue disclosures will show whether the gap between chip makers and cloud giants keeps widening. The data currently favors the sellers of compute over the spenders.

FAQ

Which companies does the analyst recommend buying and avoiding?: Buy list: Nvidia, Broadcom, Micron, AMD, and Dell. Hold list (avoid until monetization is clear): Microsoft, Oracle, and Google.
Why are hyperscalers losing money on AI spending?: Reitzes argues they do not generate cash, may not generate cash next year, and do not buy back stock. Microsoft's CapEx surged to $30.88 billion（約4.9兆円） up 84.4% year over year, while Alphabet's free cash flow fell 46.6% year over year to $10.12 billion（約1.6兆円）, despite both posting strong AI revenue.
What are the next key signals to watch?: Hyperscaler July earnings, where CapEx guidance and AI revenue disclosures will determine whether the gap between chip makers and cloud giants continues to widen.

Discussion

No discussion yet for this article

Stay ahead with AI news

Get curated AI news from 200+ sources delivered daily to your inbox. Free to use.

Get Started Free

Free · takes 30 seconds · unsubscribe anytime

5 minutes a day. The AI essentials.

200+ sources · Email / LINE / Slack

Get it free →