Software stocks are getting punished for AI spending, but hardware is booming — long TSMC over Microsoft
While software and cloud giants like Microsoft are getting crushed by Wall Street for spending too much money, the companies that actually make the physical hardware—like TSMC and Micron—are reporting record profits. Investors should consider shifting away from software and into the 'picks and shovels' of the AI gold rush.
Idea
Microsoft's stock is having its worst month in years specifically because investors are punishing the company for its massive capital spending on AI data centers. However, that exact spending is showing up as record revenue for hardware companies like Micron and TSMC. Rather than betting on who can build the best AI software, the smart money appears to be flowing to the foundational manufacturers who get paid regardless of which software wins.
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News sources
- Microsoft's stock is suffering a historic June rout as investors balk at heavy spending — MarketWatch
- Strong Earnings Demonstrate Taiwan Semiconductor Manufacturing Company Limited's (TSM) Key Role in The AI-Capex Cycle — Yahoo Finance
- Micron says the AI party is far from over, but not all are celebrating — CNBC