Summary

• The current AI-driven CapEx cycle is fueling semiconductor stocks’ outperformance while US hyperscalers face mounting balance sheet risks and underperformance.
• Hyperscalers like Meta, Amazon, and Oracle are trapped in the AI narrative, issuing debt and risking negative free cash flow to sustain AI investments.
• Semiconductor companies benefit from hyperscalers’ relentless spending, but their recent explosive growth is unsustainable due to industry cyclicality and rising input costs.
• I expect hyperscalers to underperform short-term but regain dominance long-term, while semiconductor stocks face significant downside once AI CapEx normalizes.

Semiconductors are keeping the market afloat

Even though we are living through a challenging geopolitical context in which oil prices could stay higher for longer and food prices might increase significantly, the S&P 500 (

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Analyst’s Disclosure: I/we have a beneficial long position in the shares of GOOG, META either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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