Bill Ackman's Pershing Square Says Wall Street Is 'Penalizing Hyperscalers' For Build-Out Costs, Ignoring Growth Potential

Pershing Square sees AI infrastructure spending driving stronger future growth for major tech companies.

• AI chip and hardware companies have led the market rally, with semiconductor stocks rising 44% and technology hardware stocks gaining 36%. 
• Meanwhile, Microsoft, Meta, Amazon and Alphabet shares rose just 8% on average despite 27% earnings growth. 
• Pershing Square thinks investors and analysts are overlooking the potential for higher revenue and profits from hyperscalers. 

Pershing Square stock traded over 2% higher overnight, heading into Tuesday. 

Pershing Square Highlights  Wider Gap Between Stock Prices And Earnings

In its third-quarter letter to shareholders, Pershing Square noted that the S&P 500 advanced slightly more than 2% in Q3, but the typical company in the index fell 4%. More than 60% of its constituents ended the period lower. Through Sept. 30, the benchmark had climbed 13% for the year, while the average constituent gained just 1%.

Meanwhile, estimates for the median S&P 500 company's earnings per share rose 4% during the quarter and nearly 10% over the first nine months. Pershing Square said this disconnect has created opportunities to buy businesses whose underlying performance has improved despite weaker share prices.

AI Infrastructure Suppliers Lead The Rally

According to Pershing, companies supplying semiconductors and technology hardware have benefited significantly from AI-related spending. The S&P 500 Semiconductor Index has advanced 44% this year, while the technology hardware index has gained 36%.

“The buildout of AI infrastructure has been one of the principal drivers of stock market performance this year, with the ‘picks and shovels’ companies having been the largest beneficiaries.”

However, major cloud and technology companies, including Microsoft (MSFT), Meta Platforms (META), Amazon (AMZN) and Alphabet (GOOGL), have delivered an average share price increase of just 8%, despite reporting approximately 27% earnings growth.

“The decline in the hyperscalers’ P/E multiples has largely been driven by investor concerns regarding the potential returns they will earn on their elevated capex spending.”

Why Hyperscalers Could Reap Bigger Returns From AI Investments 

The investment firm believes investors are overlooking the long-term benefits of heavy AI infrastructure spending. The four major tech companies could spend a combined $740 billion in 2026, up from $140 billion in 2023. Analysts expect that figure to exceed $1 trillion in 2027. 

“We believe that the hyperscalers’ capital spending is offensive rather than defensive. Rather than merely protecting existing franchises, we believe the hyperscalers are investing to accelerate growth and are deploying capital behind a transformative technology that plays directly to their competitive advantages.”

“These include unmatched distribution, long-standing customer relationships, proprietary data and context, security and reliability at global scale, and the balance sheet strength to invest at a level few competitors can match.”

The firm said Amazon’s AI investment is boosting AWS growth, with revenue rising 39% in Q3. It is improving ad targeting and helping Meta grow revenue faster. Meta’s Muse assistant crossed 10 million downloads within weeks, creating new opportunities to earn money through shopping, services, and business tools. AI is also creating growth opportunities through Azure, Microsoft 365 Copilot, and GitHub. 

Analysts Are Underestimating Hyperscalers’ Growth Potential 

Analysts expect major technology companies to keep spending heavily on AI infrastructure for several years but do not expect their revenue growth to speed up much after this year and next. Pershing Square believes analysts are treating this spending as an ongoing cost rather than recognizing its potential to drive much higher future revenue and profits. 

“In our view, analyst estimates penalize the hyperscalers for the cost of the buildout today while ascribing limited potential to the significant future growth in revenue and earnings that are likely to result from these investments.”

The firm said much of the 2026 revenue growth comes from AI investments made in 2024 and 2025. So it expects current higher spending to drive even stronger growth in the coming years, potentially beating analysts' forecasts. 

PS Stock: Retail View 

On Stocktwits, retail sentiment around the stock remained ‘neutral’. 

PS stock has gained 92% year-to-date. 

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