Why I'm Buying Growth Stocks While Everyone Else Is Panic-Selling Tech
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.
- 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.
Despite widespread panic-selling in tech and large-cap growth stocks due to fears of a global recession and an AI infrastructure spending peak, one investor is aggressively buying, citing strong utilization of older AI chips and significant capital expenditure increases by key industry players like TSMC. This perspective challenges the prevailing sentiment that AI investments are unsustainable or unprofitable, highlighting the long-term economic viability of the AI cloud computing business.
