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

Investors are shifting their focus from the spending spree of Big Tech to identifying long-term AI winners, according to experts. Microsoft and Amazon's results reassured markets about robust demand for the infrastructure that powers artificial intelligence, with cloud growth accelerating and capacity constraints persisting. Despite a sector rout in the semiconductor sector, big investors retain significant positions in semiconductor stocks and are increasing exposure to hyperscalers, or the largest cloud service providers.

The hyperscalers are seen as likely beneficiaries of the AI paradigm shift due to their scale and ability to rapidly expand AI infrastructure. Brian Barbetta, a co-head at Wellington Management, notes that hyperscalers will benefit from their investments later next year into 2028, while Amazon remains a top overweight position for his fund.

John Lamb from Capital Group advises investors to view AI as an expanding ecosystem, emphasizing the importance of having both computing capacity and efficient deployment layers in their portfolios. Despite a compression in hyperscalers' valuations, experts recommend a long-hyperscalers, short-neoclouds trade, while acknowledging the challenges AI monetisation faces in justifying current spending plans.