Gene Munster of Deepwater Asset Management stated on the 22nd local time that investors should focus on hyperscaler companies' 2027 AI capital expenditure plans. Munster told Business Insider that the key metric in CAPEX discussions is next year's growth rate rather than current quarter results. This guidance comes amid Wall Street's heightened focus on major technology companies' long-term AI investment commitments and their implications for infrastructure suppliers.
Wall Street Projects 23% Growth in 2027 Hyperscaler CAPEX
Munster stated that Wall Street currently expects 23% growth in 2027 capital expenditure among hyperscalers. He explained that expectations increased following Google's $85 billion and Amazon's $25 billion fundraising activities. Munster emphasized that investors should pay closest attention to hyperscaler companies' 2027 plans rather than current quarter performance or the remaining 2026 period.
Munster Forecasts Sustained Spending by Four Major Hyperscalers
Munster analyzed the four major hyperscalers' capital expenditure forecasts for the next year and concluded that spending will not slow significantly compared to Wall Street expectations. He stated that if three out of four hyperscalers raise their spending outlooks, investor sentiment toward AI infrastructure will remain valid. Munster maintained that the bullish outlook remains intact based on his analysis of forward spending commitments.
NVIDIA Valuation Compression Reflects Natural Growth Deceleration
Munster assessed that these companies' stock prices are undervalued relative to recent earnings performance. Using NVIDIA as an example, he explained that valuation multiples declined as growth rates slowed compared to Wall Street expectations. Munster characterized the valuation decline as a natural phenomenon as companies find it increasingly difficult to maintain the tremendous quarterly growth rates of the past.
Deepwater Expects 20%+ Annual Revenue Growth for AI Infrastructure Stocks
Munster stated that earnings announcements could serve as a catalyst to resume upward momentum, adding that investors need not worry. He projected that annual revenue growth exceeding 20% will continue for several years. Munster concluded that if this projection proves accurate, revenue growth will more than offset declines in valuation multiples, establishing a foundation for AI infrastructure-related stocks to continue delivering strong performance.
FAQ
What did Gene Munster recommend investors focus on during big tech earnings season?
Gene Munster of Deepwater Asset Management stated on the 22nd local time that investors should focus on hyperscaler companies' 2027 AI capital expenditure plans rather than current quarter results or the remaining 2026 period. He told Business Insider that the key metric in CAPEX discussions is next year's growth rate.
What is Wall Street's current expectation for 2027 hyperscaler capital expenditure growth?
Munster stated that Wall Street currently expects 23% growth in 2027 capital expenditure among hyperscalers. He explained that expectations increased following Google's $85 billion and Amazon's $25 billion fundraising activities.
Why does Munster believe AI infrastructure stocks will continue performing well?
Munster projected that annual revenue growth exceeding 20% will continue for several years among AI infrastructure companies. He stated that if this projection proves accurate, revenue growth will more than offset declines in valuation multiples, establishing a foundation for continued strong performance.
