The market is souring on the AI hyperscalers’ massive capex, but Matrix Asset Advisors’ David Katz is using the drop to buy more.

Alphabet Inc. (NASDAQ:GOOGL) fell roughly 6% Monday and Microsoft Corp. (NASDAQ:MSFT) slipped more than 2% as investors soured on the hundreds of billions the cloud giants are pouring into AI infrastructure.

Meta Platforms (NASDAQ:META) and Amazon.com (NASDAQ:AMZN) dropped alongside them.

Katz, chief investment officer at Matrix Asset Advisors, told CNBC he is not selling. He sees a buying opportunity.

A Great Time For New Money

The pullback has left the group trading at 18 to 22 times earnings, which Katz called attractive for dominant franchises with strong long-term growth prospects.

For new money, he said it is a great time to add to the whole group, and he expects the names at least 20% higher once sentiment turns.

He owns all four and is up an estimated 500% to 800% on his original Google stake. On Microsoft, Katz said Copilot trails today but will ultimately win and rerate higher.

He reserved his sharpest defense for Amazon. When the company first built out its cloud business it ran negative cash flows and drew the same skepticism now aimed at AI, Katz said, before AWS became one of the best investments ever.

He likes Meta at 17 times earnings even as Mark Zuckerberg, who Katz said “doesn’t care about investor sentiment,” keeps up a “spending binge.” After Meta drops about 30%, Katz said, it has historically been a good time to add.

The Chips Are The Crowded Trade Now

The companies buying the chips are getting punished while the chipmakers selling them rally.

Micron (NASDAQ:MU) jumped close to 5% and the Philadelphia Semiconductor Index touched record highs, while Nvidia Corp. (NASDAQ:NVDA) held steady.

Katz is fading that trade. He has turned cautious on Applied Materials (NASDAQ:AMAT), Texas Instruments (NASDAQ:TXN) and Qualcomm (NASDAQ:QCOM) after runs of 50% to 300%, calling them cyclical names changing hands at peak prices with peak sentiment.

He was just as cold on the market’s other darling. Even with SpaceX (NASDAQ:SPCX) down about 25% in recent sessions, Katz said it looks richly valued and that gravity will likely drag it lower.

His bet is that the crowd has the AI trade backwards, selling the cloud giants doing the spending while crowding into the chips.

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