Business Insider Capex is the main event for tech investors heading into major earnings reports. Gene Munster says the 2027 outlook is critical for the AI narrative.
- Gene Munster says one number from tech earnings will be critical for the AI narrative.
- The tech investor is focused on capex projections for 2027.
- He sees Microsoft as the biggest risk in the capex conversation.
Big Tech earnings are here, and the AI capex discussion is set to be the main event for investors. Rather than focusing on what the current quarter—or even the rest of 2026—may hold, tech veteran Gene Munster says investors should be looking further out.
With the AI trade looking "tired," the investor says that Q2 earnings are the only thing that can generate fresh momentum. Munster, a longtime tech analyst and now managing partner at Deepwater Asset Management, says he'll be focused most on what hyperscalers are planning for 2027.
"Within the hyperscaler capex conversation, the key metric is next year's growth," Munster wrote. "As it stands, the Street is looking for 23% growth in CY27. That said, whisper expectations have moved higher following Google's $85B and Amazon's $25B capital raises, which will be spent predominantly late this year and into next year."
Munster charted the four major hyperscalers' projected capex estimates for the coming year, and predicts that spending likely won't cool as much as Wall Street anticipates, leaving a large part of the bull thesis intact.
Munster noted that much of his analysis centers on the themes of AI capex spending and cloud computing in Q2 tech earnings, which he described as equally important for investors. But while he made it clear that he sees Microsoft as the weakest link in the hyperscaler chain, even its 20% year-to-date decline isn't enough to derail the AI infrastructure boom.
"The biggest narrative risk in the capex conversation is Microsoft, where I believe management will guide investors to an unchanged 26% growth rate for next year," Munster noted. "If three of the four hyperscalers raise their outlook, I believe the AI infrastructure narrative will remain intact."
Munster says that these stocks look cheap relative to recent earnings. He cited Nvidia as an example of a company that hasn't grown as quickly as Wall Street anticipated, resulting in its valuation multiples being pushed lower, from trading at 30x earnings projections last year to 16x 2027 estimates today.
From Munster's perspective, valuation compression is a natural step for these companies, as colossal growth of past quarters becomes harder to sustain. But that doesn't mean investors should be worried, and earnings could be the update the bulls need to resume the rally.
"I expect earnings to continue growing by more than 20% annually for the next several years," he said. "If that proves true, it would lay the groundwork for AI infrastructure stocks to continue working, as earnings growth more than offsets the decline in valuation multiples."
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