Key Takeaways
- Ben Reitzes from Melius Research recommends purchasing tech stocks during the recent downturn
- His preference leans toward semiconductor companies such as Nvidia, Broadcom, Micron, and AMD rather than cloud infrastructure giants
- Reitzes described Microsoft’s artificial intelligence approach as disorganized and questioned CEO Satya Nadella’s recent strategic shift
- The analyst views computing power as a multi-decade opportunity comparable to the oil industry’s historical significance
- Major semiconductor ETFs like SOXL and SOXX experienced significant declines, though QQQ has climbed 36% year-over-year
The technology sector experienced a downturn this week, but according to Ben Reitzes, Melius Research’s leading technology analyst, this presents an attractive entry point rather than a cause for concern.
During a Tuesday appearance on CNBC, Reitzes emphasized that previous market corrections have consistently created profitable opportunities for investors who maintained their conviction.
“These have been opportunities in the past, and we just don’t really see any change,” he said.
Semiconductors Trump Cloud Infrastructure Players
Reitzes maintains bullish positions on multiple chip manufacturers, including Nvidia, Broadcom, Micron, and AMD.
Meanwhile, he expresses reservations about major cloud service providers such as Microsoft, Oracle, and Google.
His investment thesis centers on capital flows: cloud infrastructure companies are pouring massive resources into building AI capabilities, with chip manufacturers as the primary beneficiaries. “They’re handing money to my other companies. It’s never going to stop,” he explained.
Reitzes also highlighted that hyperscalers have suspended stock buyback programs and are taking on debt to finance their AI infrastructure expansion. Semiconductor firms like Nvidia, however, continue distributing capital to shareholders through buybacks and dividends.
“Why bother?” Reitzes said of investing in hyperscalers at this stage.
Microsoft’s AI Direction Draws Sharp Criticism
Reitzes directed particular scrutiny toward Microsoft CEO Satya Nadella, who recently announced the company would pursue a platform-neutral strategy regarding AI models.
In recent statements, Nadella created distance between Microsoft and leading AI developers OpenAI and Anthropic — companies in which Microsoft has made substantial investments.
According to Reitzes, Nadella’s remarks indicate Microsoft is developing its AI monetization strategy on the fly.
“They’re going to move to partial consumption, partial license… call me when they figure it out,” Reitzes said.
He expressed disinterest in cloud infrastructure investments while these companies navigate the transition between usage-based and subscription revenue models.
Despite the pointed criticism, Microsoft shares gained nearly 2% during Tuesday’s trading session.
Computing as a Generational Investment Theme
Reitzes positions artificial intelligence and computational capacity as a fundamental transformation rather than a fleeting market trend.
He estimates the industry is approximately three years into what may become a two-decade evolution. Drawing parallels to the petroleum industry, Reitzes suggests computing infrastructure will eventually eclipse oil in economic significance.
He also noted that companies not adopting AI are already losing ground to those that are. “Those who are adopting AI are going to absolutely kick the butt of those who aren’t,” he said.
Market Performance Data
The Direxion Daily Semiconductor Bull 3X Shares ETF had declined more than 23% at the time of Reitzes’s interview. The iShares Semiconductor ETF registered a nearly 8% decrease.
Reitzes suggested the selloff was partially driven by overcrowded positions in exchange-traded funds with significant exposure to Korean memory chip manufacturers.
Over the trailing twelve months, the Invesco QQQ Trust has advanced 36%. The iShares U.S. Technology ETF has posted a 49% gain during the same timeframe.
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