Wall Street: AI Trade Still On as Chip Makers Outperform Big Tech
Hyperscaler spending forecasts fuel semiconductor rally despite macro volatility and ROI concerns.
Despite growing investor skepticism over returns on massive AI investments, Wall Street analysts say the semiconductor trade remains firmly active—driven by Big Tech's unprecedented infrastructure spending.
The Makers vs. The Takers
Alphabet's forecast of $195 billion to $205 billion in capital expenditures for 2026 signals continued demand for data centers, networking equipment, and custom silicon. The scale rivals the GDP of small nations, treating AI as an industrial revolution rather than a temporary trend.
"I've been calling it the makers versus the takers," said Steve Sosnick, chief strategist at Interactive Brokers. The divergence is clear: hyperscalers face scrutiny over spending efficiency, while hardware providers see sustained demand.
Mark Mahaney, head of internet research at Evercore ISI, put it bluntly: "If you're looking for derivative stock calls, the AI trade is still on."
Semiconductor Surge
The numbers back the sentiment. The PHLX Semiconductor Index has climbed 66% year-to-date and 111% over the past year. Memory chipmakers Micron Technology, SK Hynix, and SanDisk posted gains fueled by supply shortages.
Intel shares have surged approximately 150% year-to-date as of late July 2025, driven by AI agent CPU demand and foundry business developments—including reports of Google considering Intel as a backup chip manufacturer and investments from the Trump administration and Nvidia.
Macro Headwinds
The rally hasn't been without turbulence. The 10-year Treasury yield reached 4.7% while oil prices surged to around $100 per barrel, adding volatility to high-growth tech valuations. The "Magnificent Seven" stocks have seen mixed performance as investors question the immediate payoff of AI spending.
Infrastructure Over Software
The AI trade has shifted from general software excitement to infrastructure plays—chips, networking, and data centers. If hardware providers continue outperforming despite volatility among the hyperscalers, it suggests the physical layer of AI remains the most reliable investment bet in the short-to-medium term.
For now, Wall Street's message is clear: follow the capex.