Analysis:Among AI crowd, some investors position for slower hyperscaler spending growth

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Give it a try. Click here to return to FAST Tap here to return to FAST FAST MILAN, July 17 : The parabolic rally in AI chipmakers has run into turbulence amid concern about valuations and the sustainability of their bumper revenues, with some investors quietly positioning for a slowdown in the near-trillion dollar spending boom that could provide a boon to the hyperscalers footing the bill. For most of the past two years, the opposite trade prevailed: investors piled into semiconductor and infrastructure companies on the assumption that Microsoft, Amazon, Alphabet and Meta would keep accelerating spending on the buildout of data centers.

But that spending now looks set to slow, with UBS estimating hyperscalers' capex will rise 76 per cent this year to $673 billion, but will increase by only 25 per cent next year and just 6 per cent 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. They are also buying into software stocks and sectors expected to benefit from AI adoption, such as financials and healthcare.

CNA Games Guess Word Crack the word, one row at a time Buzzword Create words using the given letters Mini Sudoku Tiny puzzle, mighty brain teaser Mini Crossword Small grid, big challenge Word Search Spot as many words as you can Show More Show Less "Once they stop increasing their capex, it will definitely be a relief for hyperscalers and a negative signal for the semi industry," said Alexis Bossard, global equity portfolio manager at Edmond de Rothschild Asset Management, who has already cut exposure to semiconductor stocks, which he believes have become too expensive relative to expectations.The Philadelphia Semiconductor Index, whose top holdings include Nvidia, Broadcom, Micron, ASML and TSMC, has more than doubled over the past year, even with a near-18 per cent drop from its June peak, compared with an 11 per cent rise in the equal-weighted S&P 500, or an 8 per cent gain in Europe's AI-light STOXX 600.Bank of America's July fund manager survey found 82 per cent 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. Bossard has increased exposure to Ama