The AI CapEx Cuts Never Came. The Spending Is Paying Off
Short covering lit the match
SK Group Chairman Chey Tae-won bought 3,620 $SK hynix(SKHY)$ shares worth approximately KRW4.8 billion, marking his first direct investment in the memory company.
Separately, Leopold Aschenbrenner's Situational Awareness fund transferred most of its public-equity portfolio to Citadel after heavy losses forced it to unwind. Reuters said it remains unclear whether margin calls were involved.
The two developments helped remove selling pressure and encouraged short covering. But they were only the spark. The more important fuel came from hyperscaler earnings.
The four hyperscaler scorecards
– $Microsoft (MSFT.US)$: CapEx unchanged, new capacity sold immediately
Microsoft said its underlying calendar-year 2026 investment expectations remain unchanged. A lease-accounting change lowered reported CapEx expectations to approximately $175B.
Azure revenue grew 43%, demand continued to exceed available capacity and additional capacity delivered during the quarter was quickly monetized. Microsoft 365 Copilot also surpassed 30 million paid seats.
– $Alphabet-C (GOOG.US)$ : CapEx raised, cloud and ads accelerating
Alphabet raised its 2026 CapEx range to $195B–$205B, from $180B–$190B, because it is accelerating capacity deliveries to meet demand.
Google Cloud revenue surged 82% to $24.8B, backlog reached $514B and the business remained supply-constrained. Cloud operating margin expanded to 35.6%.
AI is also strengthening advertising. Search revenue grew 17%, while advertisers using AI Max or Performance Max generated an average of 15% more conversions or value at a similar ROAS.
– $Meta Platforms (META.US)$ : The spending floor rose, while AI improved ads
Meta narrowed its 2026 CapEx outlook to $130B–$145B, raising the lower end from $125B.
Advertising revenue grew 27%, supported by a 14% increase in impressions and a 12% rise in average price per ad. Meta said recent AI-ranking improvements lifted Facebook ad clicks by 8.3% and conversions by 15.7%. Advantage+ exceeded a $75B annual revenue run rate.
The caveat is cash generation. Free cash flow fell to just $784M, meaning Meta's advertising benefits are real, but the returns on its much larger infrastructure buildout remain less proven than at the cloud providers.
– $Amazon (AMZN.US)$ : CapEx raised as AWS capacity sells out
Amazon raised its 2026 CapEx plan to approximately $220B, from $200B.
AWS revenue accelerated 37% to $42.2B, backlog reached $496B, and demand still exceeded available capacity. Amazon said the majority of its 2027 compute capacity was already reserved, with substantial commitments extending into 2028.
Its AI and custom-chip businesses each passed a $25B annual revenue run rate. CEO Andy Jassy also said AI servers can typically recover their cost in less than three years before generating several more years of profit.
Why this matters for semiconductors
Using Microsoft's approximate expectation and the midpoints of the other three companies' ranges, combined 2026 CapEx is about $733B.
The figures are not perfectly comparable, and some spending supports logistics, offices and other non-AI assets. But the direction is clear:
– $Microsoft (MSFT.US)$ did not cut its underlying plan.
– $Alphabet-C (GOOG.US)$ raised guidance.
– $Meta Platforms (META.US)$ raised the lower end.
– $Amazon (AMZN.US)$ raised its plan by $20B.
More importantly, the spending is producing measurable results. Cloud growth is accelerating, compute remains supply-constrained, customers are reserving capacity years ahead and AI is improving advertising returns.
That supports demand across GPUs, custom ASICs, HBM, conventional memory, optical networking, advanced packaging, foundry capacity, power chips and semiconductor equipment.
Summary
The semiconductor rally had a technical component. Forced selling eased and shorts rushed to cover, so investors should not expect every move to continue in a straight line.
But the fundamental message is stronger than the short squeeze.
The feared hyperscaler CapEx cuts never arrived. Instead, spending plans moved higher while Microsoft, Alphabet and Amazon showed faster cloud monetization, and Meta demonstrated measurable gains in advertising.
For semiconductor investors, the AI buildout now has both a larger spending floor and clearer evidence of economic returns.
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