Wells Fargo has a message on Amazon, Meta and Alphabet stocks

Wells Fargo has been bearish on hyperscalers for years. That position just shifted. Oh Sung Kwon, the firm’s chief equity strategist, told CNBC on March 23 that the group is starting to look attractive again. “I think hyperscalers are starting to look a lot more interesting,” he said.

The shift is notable precisely because of where it is coming from. This is not a firm that has been bullish on this group.

Kwon’s previous bearish view was rooted in deteriorating free cash flow. With massive capital expenditure commitments across Amazon, Microsoft, Alphabet, Meta, and Oracle, FCF estimates for the group fell by roughly two-thirds over the past year. That was the bear case. Now Wells Fargo thinks the math is changing. The selloff has created an entry point the firm was not willing to recommend before.

Kwon pointed to two things. First, the selloff itself. The Nasdaq has derated by 25% since October. Kwon called it “one of the most extreme deratings that we have seen in history.” That kind of compression, in his view, creates a margin of safety that was not there before.

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Second, he sees an inflection point in free cash flow. “Our analysts think that we are actually at an inflection point where free cash flow could actually come in above where consensus is,” he said. He also pushed back on Wall Street’s revenue estimates. “I think the street is still underestimating their potential top line growth story.”

On the overinvestment question, Kwon was direct. “If AI is truly that transformative, then hyperscalers are probably not overinvesting,” he said. “There might be a little bit of delay on the return on investment, but if AI is really that good and we’re just gonna need more compute power too.”

The concern Kwon is pushing back against is real. The five largest hyperscalers are on track to spend over $600 billion on infrastructure in 2026. That is a 36% jump from 2025, according to CreditSights estimates. About $450 billion goes directly to AI infrastructure.

For two straight years, Wall Street’s capex estimates for this group came in too low. Actual spending exceeded consensus by more than 50% each time.

Amazon alone is spending $200 billion on capex this year. Analysts expect that will push its free cash flow negative in 2026. Evercore has flagged a “red flag” threshold: if hyperscaler FCF turns negative in aggregate, it signals a major shift in the investment case.

Kwon’s counter is straightforward. If AI demand continues to outpace supply, the capacity being built now will generate returns that more than justify the cost. The risk is timing, not direction. And in his view, the street is already pricing in the worst-case timing scenario.

Beyond the hyperscalers, Kwon recommended pairing technology with commodities. Wells Fargo remains underweight on consumer discretionary and consumer staples. It holds overweight positions in energy and materials.

Microsoft, Amazon and Google have all pulled back in recent days. Cros/GettyImages · Cros/GettyImages

The logic is simple. The same geopolitical environment weighing on tech stocks is directly benefiting energy and materials companies. The Iran war and elevated oil prices are the clearest example. Pairing the two gives investors exposure to AI’s long-term upside while hedging the near-term macro risk.

Several near-term catalysts will test whether Kwon’s inflection point thesis holds:

Q1 earnings in April. Azure, AWS, and Google Cloud growth rates will either validate or undermine the top-line growth story Kwon says the street is underestimating.
Free cash flow guidance. Any signal that FCF is stabilizing ahead of consensus expectations would directly confirm the inflection point Kwon described.
AI demand signals. Enterprise contract announcements and hyperscaler capacity utilization data will show whether demand is genuinely outpacing supply as Kwon contends.

The stocks have pulled back sharply. AMZN is around $211, MSFT around $383, and GOOG around $298. Each is well off highs set earlier in this cycle.

Wells Fargo spent years on the bearish side of this trade. The firm is now saying the selloff has created the entry point it was waiting for. That is a meaningful signal from a firm with a track record of conviction on this group. Q1 earnings will be the first real test of whether that call holds up.

Related: Wells Fargo has a message for investors on Nvidia stock price

This story was originally published by TheStreet on Mar 24, 2026, where it first appeared in the Investing section. Add TheStreet as a Preferred Source by clicking here.