J P M O R G A N North America Equity Research 05 February 2026 Hardware & Networking Cloud Capex Wrap-Up: Another BIG Year of Spend in 2026 with Aggregate Hyperscaler Capex Tracking to $645 bn, Expanding +$230 bn AMZN followed GOOGL as well as META and MSFT in highlighting strong capex trends in the Dec-Q, with aggregate capex across the U.S. hyperscalers expanding by +12% quarter over quarter and +60% year over year to $127 bn. All four of the U.S. CSPs continue to highlight robust capex growth expectation ...

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Core Insights - The four major tech companies, Microsoft, Alphabet, Amazon, and Meta, are projected to invest over $650 billion in artificial intelligence in 2026, with significant capital expenditures planned [1][2][3] Investment Plans - Amazon plans to invest approximately $200 billion in capital expenditures by 2026 [1] - Alphabet's capital expenditures are expected to range between $175 billion and $185 billion for the current year [1] - Meta's spending is projected to be between $115 billion and $135 billion in 2026 [2] - Microsoft's annual run rate for capital expenditures is estimated at $145 billion for its 2026 fiscal year [2] Expenditure Growth - The total spending from these four companies is expected to increase by about 67% to 74% compared to their $381 billion expenditures in 2025, with a low-end estimate of $635 billion and a high-end estimate of $665 billion [3] Focus Areas - The majority of the investments will be directed towards AI chips, servers, and data center infrastructure [3] Market Reactions - Following the announcements, Amazon's stock fell over 8%, Alphabet's shares dropped 3%, and Microsoft experienced an 11% decline after reporting slower growth in its Azure cloud unit [5] - In contrast, Meta's stock rallied due to positive quarterly results and the impact of AI on its ad revenue [6] Investor Sentiment - Investors are exhibiting caution regarding the spending plans of tech companies, reflecting a more scrutinizing approach towards returns on AI investments [6][7] - There is a growing belief in the transformative potential of AI for enterprises, influenced by advancements from companies like Anthropic and Google's Gemini 3 [8]

Summary of Key Points from the Conference Call Industry Overview - The focus of the conference call is on the **AI-linked imports** and their implications for the **US economy** and **investment landscape**. - AI-linked imports now represent approximately **17%** of total US imports, a significant increase from **6%** two years ago, with an annualized rate of about **$550 billion** as of Q4 2025 [7][11][15]. Core Insights and Arguments - **Investment Growth**: AI spending is expected to contribute approximately **3 percentage points (pp)** to nonresidential fixed investment by **2027** [7][48]. - **Import Dynamics**: The increase in AI-linked imports is attributed to the need for advanced hardware, including GPUs, servers, and other IT equipment, which are primarily sourced from Taiwan and Mexico [17][23][24]. - **Economic Impact**: The contribution of AI-related spending to GDP growth is nuanced; while it directly contributes to growth, the offset from imports limits its overall impact on GDP [41][48]. - **Productivity Gains**: AI investment is projected to add between **0.41% to 0.43%** to real GDP growth in **2026-2027**, with only about **10%** of firms currently utilizing AI technology regularly, indicating significant room for growth [49][50]. Geographical Concentration of AI Imports - **Taiwan** is the largest direct source of AI-linked imports, accounting for about **40%** of the total, primarily due to its leadership in chip fabrication [17][24]. - **Mexico** has emerged as a significant assembly hub, with **25%** of AI-linked imports, reflecting a shift in the supply chain dynamics [17][24]. - **ASEAN countries** collectively account for another **25%** of AI-linked imports, with Vietnam, Indonesia, and Thailand playing key roles [17]. Challenges and Considerations - The complexity of tracking AI-related capital expenditure (capex) is highlighted, as much of the investment is reflected in imports rather than domestic production [51][53]. - The **tariff environment** is favorable for AI-related imports, with low average applied rates, which has facilitated uninterrupted growth in import volumes [28]. - The **memory supply chain** is identified as a critical bottleneck for AI performance, with significant implications for future investment and productivity [58][61]. Future Outlook - The call emphasizes the expectation of continued acceleration in AI capabilities and adoption, necessitating further investment in data and systems integration [56]. - The **US policy agenda** is anticipated to support domestic manufacturing and supply chain resilience, which could influence future investment dynamics [67]. - Key debates for 2026 will revolve around the ROI of AI technology, productivity impacts, and the competitive landscape between US and Chinese AI solution providers [64]. Additional Insights - The **shift in supply chains** away from China has been ongoing since 2018, with increasing reliance on other Asian economies for technology products [33]. - The **memory market** is expected to experience a significant upcycle, driven by AI and hyperscale data center growth, with major players like **Samsung Electronics** and **SK hynix** positioned favorably [60][61]. This summary encapsulates the critical insights and projections discussed during the conference call, focusing on the implications of AI-linked imports for the US economy and investment landscape.

Meta Platforms (NASDAQ: META) beat Wall Street estimates when it recently reported revenue of $59.9 billion and diluted earnings per share of $8.88 for Q4 2025 (ended Dec. 31). Shares of the social media and digital ad leader are up 9% this year (as of Jan. 29). And they have climbed 372% in the past 36 months. Here's one prediction for Meta Platforms in 2026. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now, when you join Stock Advi ...

San Jose, California-based Super Micro Computer, Inc. (SMCI) develops and manufactures advanced server and storage solutions built on a modular and open architecture. Valued at $17.4 billion by market cap, the company offers servers, storage systems, motherboards, full racks, chassis, and accessories worldwide. Shares of this AI server giant have underperformed the broader market over the past year. SMCI has gained 1.6% over this time frame, while the broader S&P 500 Index ($SPX) has rallied nearly 14.3% ...

Summary of Key Points from the Conference Call Industry and Companies Involved - **Industry**: Hardware & Networking, specifically focusing on Cloud Capital Expenditures (Capex) - **Companies**: Meta Platforms Inc (META), Microsoft (MSFT) Core Insights and Arguments - **Capex Growth Trends**: - Meta and Microsoft reported strong capex trends for the December quarter, with aggregate capex increasing by +10% quarter-over-quarter and +60% year-over-year to $60 billion [1] - Both companies expect significant capex growth in their respective fiscal years, with guidance for increases exceeding +$50 billion year-over-year and growth rates above +60% [1] - **Meta's Capex Outlook**: - Meta's capex for Q4 2025 rose by +14% quarter-over-quarter and +49% year-over-year to $22 billion, driven by investments in data centers, servers, and network infrastructure [3] - For 2026, Meta is guiding a full-year capex outlook of $115-$135 billion, indicating a year-over-year growth of nearly +75% at the midpoint, translating to an increase of approximately +$55 billion compared to 2025 [3] - **Microsoft's Capex Outlook**: - Microsoft’s capex is projected to grow by more than +60% year-over-year in FY26, with Q2 FY26 capex rising +7% quarter-over-quarter and +66% year-over-year to $38 billion [3] - The majority of Microsoft's spending is focused on short-lived assets, including GPUs and CPUs, with significant investments in data center capacity, including nearly 1 gigawatt added in Q2 FY26 [3] - Microsoft anticipates a sequential decline in capex heading into Q3 FY26, but year-over-year growth is still expected to be +65%, equating to an increase of +$14 billion [3] Additional Important Information - **Positive Tailwinds for Related Companies**: The strong capex growth from Meta and Microsoft is expected to benefit companies in the coverage universe that are leveraged to AI infrastructure spending, including Amphenol, Arista, Celestica, Ciena, Coherent, Fabrinet, Flex, Jabil, and Lumentum [1] - **Analyst Coverage**: The report is produced by J.P. Morgan Securities LLC, with analysts Samik Chatterjee, Joseph Cardoso, Manmohanpreet Singh, and Marc Vitenzon involved in the analysis [2] This summary encapsulates the key points from the conference call, highlighting the robust capex growth expectations for Meta and Microsoft, along with the implications for related companies in the industry.

Intel Corporation Conference Call Summary Company Overview - **Company**: Intel Corporation (Ticker: INTC.O) - **Industry**: Semiconductors - **Market Cap**: $263.778 billion - **Price Target**: Increased from $38.00 to $41.00 Key Points Financial Performance - **4Q Financials**: Non-GAAP revenue of $13.874 billion, exceeding estimates of $13.438 billion and $13.321 billion [doc id='13'][doc id='36'] - **Segment Performance**: - Client Computing (CCG) revenue: $8.193 billion (down 7% year-over-year) - Data Center & AI (DCAI) revenue: $4.737 billion (up 9% year-over-year) - Intel Foundry Services (IFS) revenue: $4.507 billion (up 4% year-over-year) [doc id='13'] - **Gross Margin**: 37.9%, down 206 basis points quarter-over-quarter and 418 basis points year-over-year, but above estimates [doc id='13'] - **EPS**: Reported at $0.15, above the Street estimate of $0.08 and Morgan Stanley's estimate of $0.06 [doc id='13'] Guidance and Future Outlook - **Next Quarter Guidance**: Revenue expected at $12.2 billion (down 10.8% quarter-over-quarter and 3.7% year-over-year), below Street estimates [doc id='14'] - **Gross Margin Guidance**: Projected at 34.5%, below previous estimates [doc id='14'] - **EPS Guidance**: Expected at $0.00, below Street estimates of $0.06 [doc id='14'] - **Long-term Outlook**: Projected revenue for CY2026 at $53.097 billion with a gross margin of 39.0% and EPS of $0.63 [doc id='15'] Market Dynamics - **Supply Constraints**: Ongoing supply issues are impacting revenue growth, with no growth expected in the second half of 2025 [doc id='3'][doc id='4'] - **Competitive Landscape**: AMD has captured all unit growth due to Intel's supply constraints, raising concerns about further share loss [doc id='4'] - **Server Market**: Strong demand exists, but Intel's supply growth is lagging behind competitors [doc id='10'] Strategic Considerations - **Foundry Business**: Intel's foundry strategy faces challenges, including customer skepticism and competition from TSMC and Samsung [doc id='12'] - **Investment in Technology**: Management emphasizes the need for clarity in strategic direction and regaining performance leadership in server CPUs [doc id='22'] - **Partnerships**: Recent partnerships, such as with NVIDIA, are viewed positively but require execution to unlock value [doc id='16'] Risks and Concerns - **Execution Risks**: Uncertainty in the CPU roadmap and foundry strategy could impact stock performance [doc id='19'] - **Market Sentiment**: The stock's recent rally may be driven by geopolitical enthusiasm rather than fundamental improvements [doc id='17'] - **Competitive Pressures**: Continued competition from AMD could lead to further share losses and pressure on average selling prices (ASPs) [doc id='34'] Conclusion - **Investment Rating**: Currently rated as Equal-weight, with cautious sentiment due to stock appreciation and ongoing execution risks [doc id='15'][doc id='22'] - **Price Target Adjustment**: Price target raised to $41.00 based on revised EPS estimates and market conditions [doc id='18']

Core Insights - Dell Technologies is undergoing a significant transformation, moving from a traditional PC-centric business to a key player in the AI infrastructure market, attracting investor interest [3][16] - The company has reported substantial revenue growth, particularly in its Infrastructure Solutions Group, which includes servers and networking, driven by the demand for AI-optimized solutions [6][8] - Dell's earnings per share have increased nearly 40% year over year, reflecting improved pricing and a more profitable product mix, which is unusual for a company historically associated with office PCs [10][12] Revenue and Growth - In the latest fiscal year, Dell generated approximately $95–96 billion in revenue, with significant growth coming from servers and networking, indicating a robust demand for AI infrastructure [8] - The company has a multi-billion-dollar backlog of AI servers, suggesting strong future revenue potential as customers have already placed orders [9] Market Position and Valuation - Dell is benefiting from increased AI spending without being valued as a speculative tech stock, maintaining a valuation that reflects its traditional business model while transitioning to higher-value infrastructure [12] - The company is committed to returning capital to shareholders through dividends and share repurchases, which is a rare combination in the tech hardware sector [13] Long-term Outlook - The current AI infrastructure spending cycle is expected to be a multi-year trend, with Dell positioned to provide comprehensive solutions at scale, making it a key player in this evolving market [14][15] - The PC business now serves to stabilize Dell's overall operations, while the real growth opportunities lie in infrastructure and enterprise services [15][16]

Core Viewpoint - Dell Technologies Inc. is recognized as a trending AI stock, with Goldman Sachs initiating coverage with a Buy rating and a price target of $165, driven by AI server strength and data center recovery [1] Group 1: Investment Outlook - Analysts believe Dell is positioned as an AI winner, benefiting from cyclical recovery in its core data center hardware business, which supports potential upside despite challenges in the PC market [1] - Even with cautious assumptions regarding PC demand and profitability, Dell is expected to exceed consensus sales and earnings estimates due to ongoing AI server momentum and recovery in core servers and storage [2] Group 2: Competitive Advantages - Dell's ability to manage commodity cost headwinds more effectively than its peers is attributed to its scale, large direct sales force, and favorable business mix [2] - The company provides a range of IT solutions, including servers, storage, networking, and personal computing devices, catering to both businesses and consumers globally [3]