2 Big AI Spenders Poised to Actually Get the Payoff - Perhaps Sooner Rather Than Later

"With big tech's CapEx in the hundreds of billions and the potential for them to test the $1 trillion in the next year, investors, many of whom are starting to get just a little bit worried about a potential bubble forming in AI or AI chips, are going to want to see more in the way of returns to justify all the spending."

"Undoubtedly, there's a lot of risk when it comes to spending the kind of money that some of the Mag Seven are putting up. But with a healthy dose of skepticism out there (at least outside of the red-hot semi names), there's certainly potential for the bull case to play out that might just catch some investors a bit off-guard."

"For now, the Magnificent Seven valuations seem to be in a rather muted spot, especially when it comes to Microsoft ( NASDAQ:MSFT | MSFT Price Prediction) or Meta Platforms ( NASDAQ:META), which might even be at risk of trading a bit lower than where they were before the AI boom started. Is that a deep discount that investors should be taking advantage of? Or is it more prudent to head into wait-and-see mode and slap a discount on the shares of some of the heavier spenders in AI?"

"At this juncture, it seems like the mega-cap tech titans spending all of this cash aren't about to pull the brakes just because their share prices are responding negatively to the CapEx. Many have been more than willing to cut elsewhere. Of course, if we're in for three or more years of mounting CapEx without that much in the way of a return that soothes investors' spending concerns, perhaps the discount on some of the big spenders could be more than warranted."

Big tech is investing hundreds of billions in capital expenditures and may test up to $1 trillion in the next year. Investors are concerned about a potential bubble in AI and AI chips and want clearer returns to justify spending. Valuations for the Magnificent Seven appear muted, with some firms such as Microsoft and Meta potentially trading lower than before the AI boom. The spending is not being slowed by negative share-price reactions, and companies may cut costs elsewhere. If multi-year CapEx rises without sufficient returns, discounts on heavy AI spenders could become more justified. Lower valuation multiples are framed as skepticism about the leaders managing the spending.

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