Buying Growth Stocks as Tech Sells Off on Recession
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- Energy stocks have received a boost, while there's been a general rotation out of technology and large-cap growth stocks into value and small-cap stocks, partly due to fears of a prolonged conflict with Iran leading to a global recession.
- Alphabet (GOOGL +1.82%, GOOG +1.98%) reports its seven- to eight-year-old tensor processing units (TPUs) remain 100% utilized, and CoreWeave states its five-year-old graphics processing units (GPUs) are still fully booked, countering concerns about chip obsolescence.
- The five largest hyperscalers are projected to spend around $700 billion on AI infrastructure this year, sparking fears that this spending boom might be peaking.
- Taiwan Semiconductor Manufacturing (TSMC) significantly increased its capital expenditures to boost advanced chip capacity, a move seen as a strong validation of the long-term profitability of the AI cloud computing business, given its substantial stake.
- Alphabet and Amazon (AMZN +0.37%) are highlighted as key growth stock buys, with both companies heavily investing in AI infrastructure and showing strong growth in their cloud computing units.
Why it matters: The $700 billion projected AI infrastructure spending by hyperscalers could signal either a bubble or sustained profitability for companies like TSMC, Alphabet, and Amazon.
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