UNITED STATES: Investors are increasingly shifting their focus from whether Big Tech’s massive artificial intelligence spending will generate returns to identifying the companies most likely to benefit from sustained AI demand. The change follows stronger-than-expected results from major cloud providers, which have reassured markets that demand for AI infrastructure remains strong despite concerns over the scale of capital expenditure.
Microsoft and Amazon reported robust cloud growth in their latest earnings, helping ease concerns that the multibillion-dollar investments being made in AI infrastructure could fail to generate sufficient returns. Cloud growth is accelerating while shortages of computing capacity continue, increasing the appeal of companies that provide the infrastructure needed to support AI development.
Large asset managers continue to hold significant positions in semiconductor companies, while also increasing exposure to major cloud providers, known as hyperscalers. These firms have the financial resources and scale to expand AI infrastructure rapidly as demand from businesses and AI laboratories grows.
Neocloud Providers Gain From AI Capacity Shortages
Smaller AI infrastructure companies known as neocloud providers have also attracted investor interest. CoreWeave and Nebius have benefited from limited AI computing capacity and elevated pricing for available infrastructure. CoreWeave shares have risen about 50%, while Nebius has gained more than 200%, according to Reuters.
The gains have outpaced several of the largest AI capital spenders. Shares of the four biggest AI infrastructure investors have lagged the Philadelphia Semiconductor Index, which has risen about 75%.
Investors nevertheless expect the major hyperscalers to benefit as their infrastructure investments begin generating stronger returns. Janus Henderson portfolio manager Richard Clode said these companies could begin growing profits and cash flow faster than their additional capital expenditure from late 2027 into 2028. Amazon remains one of the fund’s largest overweight positions.