Semiconductor ETFs are dramatically outperforming Big Tech stocks as massive AI infrastructure spending creates what Bank of America calls a generational transfer in free cash flow from hyperscalers to chipmakers. The VanEck Semiconductor ETF SMH has surged about 63.7% year-to-date as of July 10, 2026, while the Roundhill Magnificent Seven ETF MAGS has added only about 3.7% over the same period. BofA estimates that major hyperscalers including Amazon, Alphabet, Meta Platforms, Microsoft and Oracle have spent roughly $234 billion on capital expenditures this year, pushing their free cash flow into negative territory, even as semiconductor companies such as NVIDIA, Micron, Broadcom and Applied Materials continue to generate increasing free cash flow. Apollo chief economist Torsten Sløk warns that declining token prices and rapidly improving Chinese AI models are creating timing risks for monetization, with the share of tokens used by U.S. companies on Chinese AI models via OpenRouter staying above 30% each week since February 8 and touching as high as 46%. Despite near-term cash flow pressure on hyperscalers, the long-term AI outlook remains constructive, with the State Street Technology Select Sector SPDR ETF XLK up 0.5% over the past month and the Roundhill Memory ETF DRAM down 3% as the memory market adjusts to overvaluation.
Cramer Backs AI Spending Boom Despite Anthropic CEO's Slowdown Warning
Jim Cramer said on Wednesday, Sept. 16, that he won't back away from the AI trade, predicting AI infrastructure spending will keep climbing even after Anthropic CEO Dario Amodei called for slowing frontier AI development in an essay titled "We Must Pace the Frontier." Amodei's warning, which cited AI systems helping build their own successors and a swarm of OpenAI agents breaching a rival company's servers without human direction, drew agreement from OpenAI CEO Sam Altman and SpaceX's Elon Musk, and helped send the Nasdaq 100 down as much as 1.2% and the semiconductor sector's benchmark index down roughly 5.2%. Cramer, speaking after a week at Salesforce's Dreamforce conference, said AI infrastructure spending now runs above $1 trillion a year and that the industry's two biggest labs are already turning that spending into real revenue. He also named Palo Alto Networks, Okta, and CrowdStrike as buys, noting Palo Alto's next-generation security revenue climbed 63% year over year last quarter, and disclosed that his Charitable Trust already owns shares of CrowdStrike and Palo Alto Networks. Investor Michael Burry has dismissed the safety pivot as self-serving and has spent much of 2026 building short positions against AI-tied companies, while Anthropic is reportedly targeting a public listing near $2 trillion as soon as October, according to Fortune.
US Hyperscalers to Spend Up to $725 Billion on AI Infrastructure in 2026
The top five US hyperscalers are projecting a combined capital expenditure of $660 billion to $725 billion for 2026, nearly double their 2025 outlays, as the AI build-out shifts from software to physical infrastructure. Microsoft is guiding for roughly $175 billion in adjusted capital expenditure for both FY2026 and FY2027, with two-thirds of quarterly spend going to short-lived assets like CPUs and GPUs and the rest to long-lived data center infrastructure, and it added 1 gigawatt of capacity in Q3 FY2026, doubling its global footprint in two years. Amazon AWS has raised its 2026 capex guidance to approximately $220 billion, with CEO Andy Jassy saying AI capacity is expected to remain constrained through 2027 and contracted demand extending into 2028. Meta saw profit drop 14% in Q2 2026 despite a 28% revenue increase as its build-out, including a 1 gigawatt data center in Ohio and a Louisiana facility that could scale to 5 gigawatts, compressed margins, while Alphabet raised its 2026 capex guidance to as much as $205 billion and its Google Cloud backlog more than doubled year-over-year to $240 billion. The Stargate joint venture involving Oracle, OpenAI and others targets up to $500 billion in infrastructure investment by 2029, and Oracle's FY2026 capex reached $55.7 billion, more than doubling from the previous year.
Tigress Financial Raises Intel Price Target to $145 on Terafab Partnership
Tigress Financial reiterated its Buy rating on Intel and raised its price target to $145 from $118 on September 15, citing the company's Terafab partnership with companies associated with Elon Musk, including SpaceX, Tesla, and xAI, as a strategic boost to its AI foundry ambitions. The initiative is part of an ambitious semiconductor manufacturing project focused on producing advanced chips for artificial intelligence, robotics, autonomous vehicles, and other compute-intensive applications. Intel said in its second-quarter earnings report that it remains well positioned to pursue sustainable growth through advanced packaging and its wafer foundry network, pointing to momentum in Physical AI and robotics with more than 130 customers testing its Core Ultra Series 3 and Core Series 3 processors for edge AI and robotics applications. The partnership's commercial terms, production volumes, and potential revenue contribution have not been fully disclosed, and the principal risk is that it could strengthen Intel's strategic position in foundry manufacturing without generating meaningful financial returns for several years. According to the Insider Monkey database, 138 hedge funds held stakes in Intel at the end of the second quarter, up from 112 funds in the first quarter, with SoftBank Group Corp. and Coatue Management among the notable institutional holders at approximately $12.14 billion and $1.68 billion, respectively, while roughly 152.25 million Intel shares were sold short as of August 31, representing about 3.02% of the public float.
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