Cloud Giants Fuel Semiconductor Sector Amid $830 Billion Spending Spree

The iShares Semiconductor ETF (SOXX) plummeted by 23% in July from its highs, but recent earnings reports from major cloud computing vendors may indicate a buying opportunity for investors.

The big five cloud hyperscalers - Amazon (AMZN), Microsoft (MSFT), Alphabet (GOOG)(GOOGL), Meta Platforms (META), and Oracle (ORCL) - all reported strong cloud growth in their Q2 earnings, with Amazon's cloud growth accelerating to 37%, Microsoft's Azure growth increasing to 43%, and Alphabet's cloud growth jumping to 82%.

The big spenders are these top five cloud infrastructure companies, with Amazon raising its 2026 capital spending target to $220 billion, Alphabet to $200 billion, Meta Platforms to up to $145 billion, Microsoft maintaining its spending after a minor accounting change, and Oracle forecasting up to $95 billion in gross capital expenditures for its fiscal year ending next March.

This $830 billion in spending is going toward servers packed with GPUs, CPUs, ASICs, and networking equipment - a boon for the chip sector. While some investors may be worried that AI spending might not last, all indications from this earnings season point to a shortage of AI compute and continued strong demand for the foreseeable future.