Key insights
- The continued massive capital expenditures by hyperscalers on data center infrastructure, exemplified by Alphabet's significant funding round, provide a strong lifeline for semiconductor and memory companies. If demand persists and these tech giants deepen their competitive moats through further investment, it suggests that semiconductor and memory stocks, despite recent gains, may still be undervalued and could sustain their upward momentum.
They've had a hyperbolic move upward, not just the large players but essentially every company in both of these categories, regardless of country. Now the hyperscalers spending 700 billion + on capex for data center infrastructure is effectively the lifeline for these companies. Alphabet this week announced an 80 billion raising round, and possibly the other mag7 follow suit in various forms. Many of them are moving towards negative net debt, unheard of from a few years ago where they were deep in cash and effectively no debt, leading to pristine balance sheets. If they continue to invest into these data centers in order to further entrench moats, if the demand continues to keep up, wouldn't this mean the semiconductors and memory companies are actually undervalued, thus they could continue the hyperbolic runs?