2025-08-05 03:15Investment Rating - The report maintains a positive outlook on the technology sector, particularly focusing on cloud and AI growth, with significant upward revisions in capital expenditure forecasts for 2025 and 2026 [22][23]. Core Insights - Amazon's cloud growth is moderating, with AWS sales increasing by 17.5% YoY to US$30.9 billion, but operating margins have compressed from 36% to 33% due to higher depreciation costs [2][4]. - The overall sales for the top five hyperscalers in Q225 showed a +9% QoQ and +15% YoY increase, indicating a strong recovery trajectory in cloud services [22]. - Capital expenditures for the top five hyperscalers reached US$104 billion in Q225, reflecting a +27% QoQ and +72% YoY increase, with a shift towards short-lived GPU assets [22][23]. Summary by Sections Amazon Performance - Amazon's Q225 sales were reported at US$168 billion, up 12% YoY, exceeding guidance [4]. - The company's US business grew by 11% YoY to US$100 billion, while international sales increased by 16% YoY to US$37 billion [4]. - Amazon's capital expenditures in Q225 were US$32.2 billion, up 29% QoQ and 85% YoY, with guidance for 2025 capex to reach US$122 billion, a 47% YoY increase [4][22]. Cloud and AI Growth - The report highlights that AI-related sales at Amazon are growing at triple-digit rates, with management expecting continued growth from the shift to cloud and increased AI applications [4][22]. - The hyperscaler cloud growth is projected to recover, with an acceleration from ~20% YoY growth to mid-20% growth, driven by ongoing workload migration to cloud services [22]. Inventory and Tariff Impact - Amazon's inventory increased by 5% QoQ and 10% YoY to US$40.8 billion, with inventory days rising to 46 days, above the past eight years' Q2 average [5][28]. - The report notes that tariff impacts have been limited so far, with no major demand or pricing changes observed [5][30]. Semiconductor and Supply Chain Outlook - UBS maintains a positive view on semiconductor companies that support high-performance computing, with key picks including TSMC and ASE [27]. - The report indicates that supply constraints are expected to persist into next year for several hyperscalers, affecting their ability to meet rising compute demand [22][27].