The thesis
The largest cloud companies kept raising their 2026 spending plans in July, and chip stocks rebounded from their worst month since 2008. On sales multiples, most of this group sits near the top of its own history, led by chip equipment. Nvidia is the exception: revenue grew faster than its price.
By Jake, founder of StockResearch.app · Oct 5, 2026 · Opinion, not investment advice
Where the money comes from
Almost every company here sells to the same few buyers. In July, Alphabet raised its 2026 capital spending plan to $195 to $205 billion and said 2027 would be significantly higher (Investing.com). Amazon lifted its plan to about $220 billion, partly because memory got more expensive (Level Headed Investing). Meta guided $130 to $145 billion (Meta), and Microsoft expected more than $50 billion in the September quarter alone (Directions on Microsoft).
That money flows down a chain. Cloud companies buy GPUs and custom chips, TSMC makes them on machines from ASML, Applied Materials, Lam and KLA, and servers, switches and optical links tie them into clusters. Neoclouds such as CoreWeave rent the result to AI labs.
A crash in July, then a rebound
The Philadelphia Semiconductor Index fell 21% in July, its worst month since October 2008, erasing $2.2 trillion in market value (Fortune). Investors worried that spending was peaking and that cheap open-source models would cut demand. A July 27 report that China had begun producing its own immersion lithography machines hit equipment stocks (Bloomberg). Nvidia and Broadcom rose that month anyway.
Results then came in above the fears. Nvidia reported quarterly revenue of $96.2 billion, up 106%, and guided to $108 billion (Nvidia). Broadcom’s AI chip revenue rose 221% (Broadcom). In September, AMD and Intel each gained about 29% (Yahoo Finance). We tested Gavin Baker’s claim that no hard metric had turned negative in our checklist of his July argument.
Most of the chain is priced near its highs
When we reviewed this page (October 5, 2026), Applied Materials, Lam and KLA sat at the 97th or 98th percentile of their own five-year EV/Sales ranges, after starting the year at the 100th. Arista, AMD and Dell were at the 98th or higher. The July dip barely moved those ranks.
Three names sat in the bottom quarter. Nvidia was at the 20th percentile on EV/Sales and the 3rd on P/E, because trailing revenue grew 83% while the price lagged. Super Micro sat at the 24th and CoreWeave at the 22nd, on less than a year of history. A low rank after fast growth can also mean investors doubt the growth will last.
TSMC, ASML and Nebius file annual reports as foreign issuers and Tokyo Electron lists in Tokyo, so they show a current value without a rank. Our data-quality monitor has Broadcom and Astera Labs under review, so they are left out of the layer medians.
The bear case
The build-out runs more and more on debt. Big cloud companies issued $219 billion of investment-grade bonds this year through mid-August, and their spreads widened about 30 basis points while the broad index barely moved (J.P. Morgan Asset Management). CoreWeave’s second-quarter interest expense was $640 million on $2.6 billion of revenue (Investing.com).
Physical limits matter too. New York paused state permits for data centers of 50 megawatts or more in July (Davis Polk), and power remains the slowest input to add; the AI Power theme covers that side.
What would change the view
- A large cloud company cutting its 2026 or 2027 spending plan.
- GPU rental prices falling for months. Nebius raised its prices on October 1 (24/7 Wall St.).
- Cloud bond spreads widening further, or a neocloud struggling to refinance.
- More states pausing data-center permits, as New York did in July.
- Chinese lithography tools reaching volume and cutting equipment makers’ China sales.