Melius Research: Buy the Chip Dip, Skip Hyperscalers Until AI Payoff Clear

Melius Research: Buy the Chip Dip, Skip Hyperscalers

Ben Reitzes, head of tech research at Melius Research, told CNBC that investors should lean into chip-stock weakness and stay clear of hyperscalers paying for the AI buildout. "I'm telling them to buy on the dip. These have been opportunities in the past, and we just don't really see any change," Reitzes said.

Recommendation Details

Reitzes did not specify which chip stocks to buy, but noted that the entire semiconductor sector benefits from AI demand. He advised avoiding hyperscalers like Microsoft and Alphabet until their massive AI investments show clear returns.

Analyst's Reasoning

Reitzes believes hyperscalers are spending billions on AI infrastructure without visible payoff, while chip companies like NVIDIA, Broadcom, and AMD profit from that spending without bearing the cost.

Context

The recommendation comes amid volatility in chip stocks due to concerns about slowing AI spending. Meanwhile, hyperscaler stocks have rallied over the past year.

Conclusion

Melius Research's view is bullish on chip stocks in the near term but cautious on hyperscalers until AI investments yield measurable results.