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IS WALL STREET MISSING THE BIGGER HYPERSCALER STORY?

Wall Street may be undervaluing the earnings potential of cloud giants riding the AI boom, UBS said, arguing that the likes of Amazon AMZN.O, Microsoft MSFT.O, Google GOOGL.O, and Oracle ORCL.N are evolving beyond infrastructure providers into critical distribution platforms for enterprise AI.

The brokerage said investors are acutely aware that the market is in the midst of an extraordinary surge in compute demand, driven largely by AI-focused infrastructure, but also by more traditional CPU-based cloud services.

This backdrop has fueled a long compute trade, lifting a wide range of semiconductor and hardware stocks.

Investors have largely treated hyperscalers as capital-intensive sellers of AI infrastructure, while a broader revenue opportunity exists from model access, AI products, cloud migration, and enterprise software distribution.

"Hyperscaler stocks are better-positioned than most think," said UBS.

"Demand for compute is unprecedented," UBS analyst Karl Keirstead wrote, pointing to a 39% combined revenue growth rate for AWS, Microsoft Azure, and Google Cloud in the first quarter of 2026 and a $2.1 trillion backlog across Amazon, Microsoft, Google, Oracle, and CoreWeave CRWV.O.

Shares of Microsoft, Amazon, Alphabet and Oracle rose last month or so, but UBS says that valuations of these hyperscalers have not peaked yet.

(Akriti Shah)

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