The AI trade has left the hyperscalers in the dust. What will it take for that to change?

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The AI trade has left the hyperscalers in the dust. What will it take for that to change? Published Sun, Jun 21 20262:35 PM EDTUpdated 27 Min Ago Jim Cramer@jimcramer We are beginning to see the real weaknesses in these hyperscalers. Amazon , Alphabet , Microsoft and Meta Platforms may have the money, but they have run into a brick wall in this stock market. That brick wall is hardware. I should have realized how acute the shortage is when we saw how the memory chip stocks galloped to much higher stock prices. The shortage of chips, stemming from just a handful of players in the high-bandwidth memory (HBM) category — SK Hynix with roughly 60% share, followed by about 20% apiece for Samsung and Micron — is a bottleneck they have not been able to overcome. HBM is a specialized kind of dynamic random access memory (DRAM) crucial for AI computing. We know that because Apple had to own up to price increases , squeezed by the memory makers shifting more of their capacity to HBM from consumer-grade DRAM. The stocks of another class of memory chips — Sandisk , Western Digital and Seagate , which all focus on long-term data storage — seem to have no cap on them either. They are doing their best trying to deliver innovations . I wish they were expanding directly with new fabs, but that seems to be the wrong approach according to these storage companies. The opaque nature of the cost of these chips in a business-to-business context is undeniable. We can't open up online chats to find out. It just seems like one big black box. Perhaps that's why we didn't know how onerous the penalties have become for these hyperscalers shelling out billions upon billions in capital expenditures. We do know that Microsoft and Meta both called out higher component pricing on their earnings calls as one factor behind their big capex numbers. All four hyperscalers have seen their stocks decline over the past month, while the tech-heavy Nasdaq is up almost 1%. A basket of memory stocks , meanwhile, has a one-month surge of 41%. Of the four hyperscalers, only Meta is almost entirely exposed to the consumer with an advertising model. This reliance on ad budgets severely restricts the company in the mind of the market. Meta needs a web services business , just like the other three have. If Meta had one, I could see its stock doubling and many — including us — are hanging on for one. Having a cloud business would make it easier for Meta to show a clear return on investment from all its AI capex. Meta is down 12.55% year to date. MU YTD mountain Micron's year-to-date stock performance. I had thought the HBM tightness would be alleviated by additional chip fabrication plants, known as fabs. But they can't get online fast enough, or they can't get more out of their existing machines quick enough. That's because the real intellectual property in this supply chain is not the hyperscalers, nor the memory chipmakers, but the capital equipment companies: Applied Materials , Lam Research and KLA Corp . We need more of what they produce, but we aren't going to get it in time to sort out which hyperscalers can win. The capital equipment companies are all dual and triple oriented, which is why they are regarded as more dangerous than a Micron or a Sandisk. I think that's probably false, though, because Applied Materials CEO Gary Dickerson told me last month that the company has "unprecedented visibility" from customers because demand is so strong, so I don't think they are going to have shortfalls versus Wall Street estimates any time soon. This whole memory complex has thrown a monkey wrench into the hyperscalers' growth plans. It is no longer whether they have enough Nvidia chips, as we saw at earlier stages of the AI boom. The hyperscalers have tried to tackle the Nvidia stranglehold by teaming up with Marvell Technology and Broadcom to co-design custom AI chips. We picked Broadcom to run with, and we're nearly three years into our ownership. Still, I can't believe how high Marvell has gotten this year, with shares more than tripling. It's interesting to see Nvidia CEO Jensen Huang embracing Marvell, first with a $2 billion investment in March and then, earlier this month, calling it the next trillion company . Why is it so curious? Because Marvell is working with Amazon to defeat Nvidia and build its own semiconductor business. Already, Amazon says that if its chip business was a standalone entity, it would have a $50 billion annual revenue run rate . It's incredible to see how the stock of Broadcom has collapsed, even as it continues to work with Alphabet's Google to try to break the Nvidia stranglehold. While I don't think there's a weakness in that partnership, Broadcom's last conference call confounded us. The stock was at $479 a share before earnings o