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Wall Street Insights: Over the past month, the MAGS index has clearly outperformed the Nasdaq 100 index and the Philadelphia Semiconductor Index. As AI capital expenditures approach one trillion dollars, positive signals are emerging from hyperscale cloud providers’ cloud business growth, order backlogs, and AI investment returns. At the same time, earlier hedge funds have significantly reduced their positions (the long/short ratio has fallen to the 25th percentile since 2018), and valuations have declined—creating room for funds to flow back in. Whether cloud providers can continue to lead, or whether they will become the key to the second wave of the tech-sector rally, remains the focus.
Hyperscale cloud providers are shifting from being "laggards" in the tech sector to becoming leaders. Against the backdrop of continued expansion in AI capital spending and pressure on free cash flow, cloud business monetization is accelerating, order backlogs are surging, and valuations have been sharply compressed. Combined with hedge-fund positions being thoroughly cleared, multiple factors are moving in sync, and the market is starting to discuss whether the second leg of the tech rally has already begun.