CMSI: Concerns Over AI Capex in US Internet Sector, Cloud Business Growth Momentum Strengthens
Complete. Here is the key summaryChina Merchants Securities (HK) reports that US internet sector cloud business growth has resumed, with AI investments converting to revenue and backlog orders. While free cash flow remains pressured, valuations are attractive at ~20x 2027 P/E. Meta is cautious on capex, shifting to enterprise AI, while other giants increase investment. The broker maintains a positive outlook, ranking stocks: Meta > Alphabet > Amazon > Microsoft.
China Merchants Securities (HK) said in a report that cloud business growth in the US internet sector has returned to an upward trajectory, while fundamentals of core businesses remain solid. Returns from AI investment are being realized through incremental cloud backlog orders and gains from equity investments.
The report said overall free cash flow in the sector remains under pressure, while capital expenditure guidance has diverged. Meta Platforms, Inc. (META.US) has become more cautious in its investment pace and is shifting toward enterprise AI business deployment, while the other three tech giants continue to signal increased investment.
The broker said the sector has become attractive after valuation corrections since the start of the year, trading at about 20x 2027 P/E ratio. The market continues to weigh upside room for cloud revenue against short-term free cash flow pressure, and the latest earnings results further tilted the balance toward growth. Growth at the three major cloud platforms accelerated again, and AI investment has begun converting into revenue and order backlog. The broker remains positive on the US internet sector, with stock preference ranking unchanged: Meta Platforms, Inc. (META.US) > Alphabet Inc. (GOOGL.US) > Amazon.com, Inc. (AMZN.US) > Microsoft Corporation (MSFT.US) . (ha/da)(Real-time Streaming US Stocks Quote; Except All OTC quotes are at least 15 minutes delayed.)