Goldman Sachs Favors Hyperscalers Like Microsoft Over Chipmakers Amid $700B AI Capex Surge

Goldman Sachs recommends rotating to hyperscalers including Microsoft over overheated chipmakers as Big Tech's 2026 AI capex reaches $700B, with Microsoft planning $190B (+61% YoY). The story started April 1 with Microsoft's stock down 36% from peak despite growth, due to capex at 47% of cash flow and Azure backlog pressures. It built through April 27-28 earnings hype, Citi/Morgan Stanley cautions, and OpenAI doubts; peaked April 29 with Microsoft's $82.9B revenue beat (+18% YoY); and April 30 highlighted Q1 capex $133B (+70% YoY), FCF squeezes like Amazon's 95% drop to $1.2B, and depreciation risks, balancing AI revenue hopes against allocation concerns.