Alphabet's $200B capex fuels semiconductor rally despite Big Tech selloff

Wall Street analysts are identifying a clear winner in the AI infrastructure buildout: semiconductor companies positioned to supply the massive data center expansion underway at tech giants.

Alphabet disclosed in its Q2 earnings that it expects total capital expenditures between $195 billion and $205 billion in 2026, with the company already spending more than $78 billion in the first half of the year. The spending is concentrated in data centers, networking equipment, and custom silicon chips.

Infrastructure plays outperform platform stocks

The spending announcement created an unusual market dynamic. While Alphabet and other "Magnificent Seven" stocks experienced their largest decline since April 2025 on Thursday, memory chipmakers rallied sharply. Micron Technology, SK Hynix, and Sandisk all posted gains as memory chip prices rise due to supply shortages.

"If you're looking for derivative stock calls, the AI trade is still on," Mark Mahaney, Evercore ISI head of internet research, told Yahoo Finance. He pointed to AI infrastructure stocks benefiting from spending by hyperscalers including Google, Amazon, Meta, and Microsoft.

The PHLX Semiconductor Index has pulled back from its June record but remains up 66% year to date and 111% over the past year, substantially outperforming the S&P 500's 8% and 16% gains over the same periods.

Intel rebounds on CPU demand and foundry wins

Intel exceeded Wall Street expectations in its latest quarter, driven by demand for central processing units as the industry shifts toward AI agents. The company's stock is up 14% year to date, supported by investments from the Trump administration and Nvidia, plus reports that its foundry business has secured major customers including Google for custom chip manufacturing.

"I've been calling it the makers versus the takers," said Steve Sosnick, chief strategist at Interactive Brokers, describing the divergence between companies supplying AI infrastructure and those deploying it.

Why it matters

The split between Big Tech platform stocks and their semiconductor suppliers reveals investor concern about return on investment from unprecedented AI infrastructure spending. While hyperscalers commit hundreds of billions to buildouts, the immediate beneficiaries are equipment makers rather than the companies making the bets. This creates tactical opportunities for investors willing to look beyond headline AI names to the supply chain enabling the expansion. However, Gil Luria of D.A. Davidson cautioned that even within semiconductors, selectivity matters: "There are two types of semis right now," suggesting not all chip companies will benefit equally.

The details were first reported by Yahoo Finance.