Will AI Hardware Stocks Achieve a V-Shaped Recovery? Chen Feng-hsin: Fundamentals Are Sound, CSP Orders Visible Through 2030

AI-related stocks experienced a correction in July. However, recent financial reports from major cloud service providers (CSPs)—Alphabet, Amazon, Meta, and Microsoft—show continued strong investment in AI data centers and computing power. Senior media commentator Chen Feng-hsin analyzed this trend on the program 'Wind Direction Longfeng Pei,' stating that CSPs have already proven to the market that investing in data centers is a profitable model.

Chen emphasized that CSP financials indicate ongoing rapid investment in computing infrastructure. The combined capital expenditures of Alphabet, Amazon, Meta, and Microsoft are expected to increase by an additional $20–30 billion this year. U.S. publication Barron's also analyzed that the cloud businesses of Alphabet, Amazon, and Microsoft have grown due to AI-related capital spending.

Chen pointed out that after increasing capital expenditure, the 'incremental margin' of CSP cloud businesses reached 50.2%. This demonstrates that investments by at least Alphabet, Amazon, and Microsoft in AI data centers are sustainable, meaning capital expansion in this area will continue.

However, Chen noted that CSP capital spending growth has outpaced cash flow from other businesses, causing market concern. Despite this, these companies maintain strong financial health, making debt financing accessible. The key question, Chen stressed, is whether there is a clear path to profitability.

Chen explained that the market does not fear excessive data center investment by tech giants, as long as CSPs prove such investments generate returns. Once proven, the market encourages continued spending. According to Bank of America (BofA) research, CSP hardware investments in AI data centers will grow rapidly through 2030, ensuring a steady stream of orders for hardware suppliers, forming a solid foundation for the sector.

Finally, Chen predicted that AI hardware stocks, after their sharp July decline, are unlikely to achieve a V-shaped recovery. Many investors have turned cautious post-correction, requiring time to absorb selling pressure. Chen emphasized, 'Fundamentals are sound; technical adjustments are needed, and investors should avoid excessive leverage.'

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