Meta (META)·Microsoft, Artificial Intelligence (AI) Bubble Warning Light...1999 Deja Vu?

▲ Meta (META), Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOGL), Artificial Intelligence (AI), Semiconductor/AI Generated Image

Meta Platforms (META), Microsoft (MSFT), Amazon.com (AMZN), and Alphabet (GOOGL·GOOG) are showing diverging trends from semiconductor stocks amidst the burden of artificial intelligence (AI) capital expenditure. As a result, warning signs resembling those just before the 1999 dot-com bubble have emerged in the market.

According to FXLeaders, a financial media outlet, on July 3 (local time), JPMorgan warned that the performance gap between Meta Platforms, Microsoft, Amazon.com, Alphabet, and AI hardware-related stocks is widening. The outlet highlighted that this trend is similar to the divergence seen in the market just before the 1999 dot-com bubble collapse.

JPMorgan analyst Jason Hunter observed a diverging trend in stock prices between hardware-related stocks and large AI investment companies within AI transactions. The Philadelphia Semiconductor Index surged 87% this year, and the Roundhill Memory ETF jumped 141% since its launch in April. In contrast, ETFs related to the Magnificent Seven have fallen 7% from their peak this year.

Underperformance was concentrated in big tech companies that aggressively executed AI capital expenditures. Meta Platforms has fallen 5% this year, and Microsoft has dropped 18%. As of June, Microsoft recorded its worst monthly decline since 2000. This is a result of investors beginning to more strictly scrutinize the speed of monetization of AI infrastructure spending and the return on investment.

Hunter explained that in 1999, while the stock prices of telecommunications equipment suppliers surged, companies that were executing large-scale capital investments declined from their peaks. He stated, "The widening gap and the clear stock price underperformance of hyperscalers now remind us of the 1999-2000 trend." He added that confirming whether individual hyperscaler stock prices bottom out this summer is necessary to reduce the risk of sentiment and position-driven adjustments in the autumn market.

The scale of AI capital expenditure was also presented as a burden. This year's AI capital expenditure for Meta Platforms, Microsoft, Amazon.com, and Alphabet is expected to reach $725 billion. JPMorgan's warning highlights that the strength in AI hardware does not necessarily mean an unconditional rise across all big tech companies. The market's attention is rapidly shifting from the semiconductor rally to whether AI investment companies' stock prices will recover.

[Article Key Summary]

-Meta Platforms, Microsoft, Amazon.com, and Alphabet are seeing their stock price trends diverge from semiconductor stocks due to the burden of AI capital expenditure.

-The Philadelphia Semiconductor Index surged 87% this year, and the Roundhill Memory ETF jumped 141% since April, but Magnificent Seven-related ETFs have fallen 7% from their peak.

-JPMorgan warned that this market divergence resembles the trend before the 1999 dot-com bubble collapse.

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