Microsoft Corp. (NASDAQ:MSFT) and Meta Platforms Inc. (NASDAQ:META) are spending hundreds of billions of dollars to build the artificial intelligence infrastructure powering the next generation of computing. Yet, according to Wedbush analyst Dan Ives, investors are rewarding the companies selling the picks and shovels—while punishing those footing the bill.
The dynamic has become especially evident following Micron Technology Inc.‘s (NASDAQ:MU) blockbuster earnings, which reignited enthusiasm for AI memory stocks even as Microsoft and Meta continue to face heavy selling pressure.
Ives described the current market as a “Twilight Zone,” arguing that investors have become increasingly impatient with hyperscalers waiting for their massive AI investments to translate into meaningful revenue growth.
Microsoft, Meta Face An AI ‘Air Pocket’
According to Ives, the market is currently in an “air pocket stage” where Big Tech’s unprecedented spending has yet to produce the financial payoff investors are looking for.
“We are in an ‘air pocket stage’ right now where the $700 billion of Big Tech cap-ex this year is fueling the AI buildout… and tech investors are growing increasingly frustrated by the patience needed around Microsoft and Meta in particular seeing the fruits of their labor,” Ives wrote.
The analyst said Microsoft and Meta are being treated “like they are bear market names that cannot be owned,” even though both remain central to what he calls the Fourth Industrial Revolution.
Instead of buying the companies building AI platforms, investors have rotated into beneficiaries such as Micron and other AI infrastructure names that are already seeing stronger demand and earnings momentum.
Why Micron Is Getting The Market’s Attention
Ives believes the divergence reflects timing rather than fundamentals.
Memory suppliers and infrastructure companies are benefiting immediately from the AI buildout as hyperscalers race to expand data centers and computing capacity. Meanwhile, companies such as Microsoft, Meta, Amazon.com Inc. (NASDAQ:AMZN) and Alphabet Inc. (NASDAQ:GOOGL) (NASDAQ:GOOG) are still waiting for those investments to generate the next wave of monetization.
“Meta is essentially looking to transform its business and that requires massive investments that will take some time to hit numbers,” Ives said.
That gap has encouraged investors to favor companies with more immediate AI revenue catalysts, even as hyperscalers continue to finance the industry’s expansion.
Dan Ives Says The Opportunity Is In Big Tech
Despite the recent divergence, Ives believes investors are becoming too focused on short-term uncertainty.
The analyst argues the current weakness in Microsoft and Meta represents “short-term pain for long-term gain,” reiterating his view that the AI revolution remains in its early stages.
“We believe this is Year 3 of a 10-year AI buildout,” Ives wrote, adding that the recent bearish narratives surrounding Big Tech have overshadowed what he sees as “future massive growth prospects.”
For investors willing to look beyond near-term monetization concerns, Ives believes today’s “Twilight Zone” market could ultimately create some of the biggest buying opportunities in the AI trade.
Photo: renderis studio / Shutterstock
Login to comment