TLDR
- Melius Research’s Ben Reitzes is telling clients to buy the current tech selloff
- He favors chipmakers like Nvidia, Broadcom, Micron, and AMD over hyperscalers
- Reitzes called Microsoft’s AI strategy a “mess” and criticized CEO Satya Nadella’s model-agnostic pivot
- He sees compute as a 20-year trend, comparing it to oil but bigger
- Semiconductor ETFs SOXL and SOXX dropped sharply, while QQQ is up 36% over 12 months
Tech stocks pulled back this week, but Melius Research’s head of technology research, Ben Reitzes, says that’s a reason to buy, not panic.
Speaking on CNBC on Tuesday, Reitzes said these kinds of selloffs have historically been buying opportunities and he sees no reason this one is different.
“These have been opportunities in the past, and we just don’t really see any change,” he said.
Chipmakers Over Hyperscalers
Reitzes holds buy ratings on semiconductor companies including Nvidia, Broadcom, Micron, and AMD.
He is more cautious on hyperscalers like Microsoft, Oracle, and Google.
His reasoning is simple: hyperscalers are spending heavily on infrastructure and funneling that money directly to chipmakers. “They’re handing money to my other companies. It’s never going to stop,” he said.
He also pointed out that hyperscalers have stopped buying back stock and are borrowing money to fund their AI buildouts. Chipmakers like Nvidia, by contrast, are still returning cash to shareholders.
“Why bother?” Reitzes said of investing in hyperscalers at this stage.
Microsoft’s AI Strategy Called a ‘Mess’
Reitzes was particularly critical of Microsoft CEO Satya Nadella, who recently said Microsoft would take a model-agnostic approach to AI.
Over the weekend, Nadella distanced the company from frontier AI model builders like OpenAI and Anthropic — despite Microsoft being a major investor in both.
Reitzes said Nadella’s comments suggest the company is still figuring out its AI strategy as it goes.
“They’re going to move to partial consumption, partial license… call me when they figure it out,” Reitzes said.
He added he has no interest in investing in hyperscalers while they are still sorting out their business models around consumption versus subscription pricing.
Microsoft shares were up nearly 2% on Tuesday despite the criticism.
A 20-Year Compute Trend
Reitzes frames AI and compute as a long-term structural shift, not a short-term trade.
He said the world is roughly three years into what could be a 20-year trend. He compared compute to oil, arguing it will eventually surpass oil in importance.
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.
The Selloff in Numbers
The Direxion Daily Semiconductor Bull 3X Shares ETF fell more than 23% at the time of the interview. The iShares Semiconductor ETF dropped nearly 8%.
Reitzes attributed part of the selloff to crowded ETF positions tied to Korean memory stocks.
The Invesco QQQ Trust is up 36% over the past 12 months. The iShares U.S. Technology ETF is up 49% over the same period.
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