Analysis:Big investors hunt for tomorrow's AI winners as capex angst fades

Investors are increasingly focusing on the potential of AI-linked companies beyond the spending patterns of Big Tech, according to market analysis. The rally in AI stocks during the latest earnings season has shifted from questioning whether Big Tech's capital expenditures would yield returns, to identifying which companies will generate profits as capacity constraints ease.

Microsoft and Amazon's solid results reaffirmed the demand for AI infrastructure, with cloud growth accelerating and capacity shortages persisting. While some asset managers retain significant positions in semiconductor stocks following a recent sector rout, they are also increasing exposure to hyperscalers, or the largest cloud service providers, who have the capacity to rapidly expand AI infrastructure in response to customer demands.

These hyperscalers are seen as likely beneficiaries of the AI paradigm shift, according to Brian Barbetta, co-head of technology platform at Wellington Management. Despite lagging behind other AI capex spenders, the hyperscalers' strategic position in computing capacity and customer relationships is expected to give them lasting advantages over neocloud providers.

Analysts suggest that a long-term investment strategy should balance exposure to both hyperscalers and neocloud providers, as the AI market matures and competition narrows the field of AI winners.