GOLDMAN ANALYST PICKS AI HYPERSCALERS OVER CHIP MAKERS

Covello's analysis positions large AI infrastructure spenders—companies like Amazon, Google, and Microsoft that build and operate their own data centers—as better investment opportunities than chipmakers supplying them. The reasoning centers on margin dynamics and capital efficiency. Hyperscalers can monetize AI investments across multiple revenue streams, while chipmakers face commodity-like competition and capital intensity. The semiconductor industry has benefited significantly from AI demand, with companies like Nvidia seeing stock surges. However, Covello's view reflects a longer-term perspective: as competition intensifies, chip pricing pressure may accelerate while hyperscalers maintain pricing power through proprietary AI services and models. The call challenges conventional investor thinking that has heavily favored chip stocks during the AI boom. It suggests peak enthusiasm for chipmakers may already be priced in, while hyperscaler advantages remain underappreciated.