Key Takeaways:
- Wedbush calls the tech sell-off a buying opportunity, not a trend breakdown.
- Big Tech will spend about $700 billion on AI infrastructure this year.
- The AI buildout is in year three of a projected 10-year cycle.
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Wedbush says tech sell-off is buying opportunity as AI CapEx hits $700B
Wedbush analysts led by Dan Ives said the tech sell-off is a buying opportunity as AI spending reaches $700 billion.
"The sell-off reflects short-term impatience, not a breakdown in the AI trade," Ives, head of technology research at Wedbush, said.
The broker estimates the largest technology companies will spend about $700 billion on capital expenditure this year to build out AI infrastructure, leaving the sector in what it described as an "air pocket stage." Microsoft Corp., Meta Platforms Inc., Alphabet Inc., Nvidia Corp., Amazon.com Inc., Oracle Corp. and Palantir Technologies Inc. have all come under heavy selling pressure, with investors treating Microsoft and Meta as if they were bear-market stocks that cannot be owned, Wedbush said.
The sell-off has spread across global markets, with South Korea's Kospi closing 10 percent lower and the Stoxx 600 Technology index falling 3.2 percent. Nasdaq 100 futures lost 2.7 percent in early trading Tuesday, while chipmakers Intel Corp., Micron Technology Inc. and Advanced Micro Devices Inc. each fell more than 6 percent in premarket trading.
Wedbush framed the current weakness as year three of a 10-year AI buildout, arguing the stocks now offer major buying opportunities. The broker identified two main concerns weighing on hyperscalers and Nvidia: the lag between enormous capital spending and any payoff in revenue, and rising compute and memory costs that could force enterprises to slow their AI buildouts.
Alphabet had been the standout performer in the group until recent weeks, when it lost several core engineers to Anthropic, Wedbush said. Meta is attempting to overhaul its business through heavy investment that will take time to feed through to earnings. Apple Inc. price increases announced the previous day sent a negative jolt through the market, feeding wider worries about neoclouds and hyperscalers being left exposed, the broker said.
Wedbush expects memory and compute costs to ease over the coming year. The broker singled out Micron Technology as one beneficiary that has thrived over the past week.
The call from Wedbush suggests institutional investors may view the sell-off as a dip-buying entry point rather than the start of a prolonged downturn. Investors will watch Micron's earnings report due later this week for further signals on AI chip demand.
This article is for informational purposes only and does not constitute investment advice.
