Big Tech Stocks Have Never Looked Cheaper. Is the Magnificent Seven a Screaming Buy?
Hyperscaler stocks are tumbling after earnings. Is it time to buy?
Following another sell-off in tech stocks, the Nasdaq Composite (^IXIC -2.93%) has reached a potential correction, dropping roughly 8% from its peak. The recent trigger was underwhelming earnings from Amazon, Intel, Sandisk, and others, highlighting investor skepticism towards the AI trade. These hyperscalers, Amazon, Alphabet, Microsoft, and Meta Platforms, are set to spend over $700 billion on cloud infrastructure this year.
Despite this massive influx of capital, these companies have reported record profits, trading at significant discounts from their peaks. Profitability is challenging to assess, as earnings per share do not account for one-time events, except for Microsoft. Operating income provides a clearer picture, with combined profits of roughly $490 billion.
While the AI industry is still new and uncertain in the long term, these companies are generating impressive growth rates, which may mitigate concerns about their return on capital investments.
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