In Al we trust: CY24 cloud capex now 35%+ YoY, stay positive data ctr. semis

Maintain Buy on $NVIDIA(NVDA.US)$ , $Broadcom(AVGO.US)$ , $Marvell Technology(MRVL.US)$ , $Advanced Micro Devices(AMD.US)$ , $Micron Technology(MU.US)$ - BofA

CQ1 reports from key US hyperscalers – Google, Microsoft and Meta -suggest meaningful upside to CY24 capex, mostly driven by buildout of AI infrastructure. We estimate CY24 global cloud capex now tracking around $220bn, up about 35% YoY or $14.5bn higher than the $205bn or up 26% YoY discussed in our recent cloud capex preview (see note) (Amazon, Oracle and China hyperscalers are still to report). Importantly, cloud customers suggest the scope for continued investments in CY25. We remain bullish on vendors serving the cloud infra market including NVDA, AVGO, MRVL, AMD, MU and their associated supply chain of semicap equipment and design tool (EDA) suppliers. Our top 5 AI beneficiaries listed above also happen to be trading at a compelling 24x average CY25E PE (range 15x-28x) after the recent correction, suggesting enhanced Buy opportunity as we get past the usual earnings season volatility discussed recently (see note). In our view, the upfront AI buildout cycle could last at-least 3-4 years (CY23-27E), with most favorable (chip) stock upside potential during the first three (CY23-25) years, followed by benefits moving towards other enterprise verticals taking advantage of AI’s productivity gains.