AI capex to surpass $1 trillion by 2027, strategist warns of chip stock correction

Matt Orton, chief market strategist at Raymond James Investment Management, predicts that AI capital expenditure will exceed $1 trillion by 2027, fueled by strong cloud monetization and capacity constraints. He warns that chip stocks could face a sharp correction if Big Tech companies fail to raise their spending guidance.

Details

In an interview with Yahoo Finance, Orton said demand for AI infrastructure is accelerating, with cloud companies generating strong revenue from AI services. He added that supply chain capacity constraints could further boost spending.

Context

The forecast comes as companies like Alphabet (GOOGL, GOOG) and Micron (MU) continue heavy AI investments. However, Orton cautioned that chip stocks could see a 15% to 20% sell-off if Big Tech's capital expenditure guidance falls short of expectations.

What it means for investors

The outlook suggests sustained AI spending momentum, which could support infrastructure and chip companies in the long term. However, investors should closely monitor Big Tech guidance, as any shortfall could trigger sharp sector volatility.