Morgan Stanley advises investors to reduce exposure to memory-chip makers, including Micron, Samsung Electronics, and SK Hynix, as much of the direct benefit from AI infrastructure spending has already flowed through the chip supply chain. Analyst Michael Wilson indicates that the market is broadening, with semiconductors losing some of their earlier momentum. He points to Meta's plan to sell spare computing capacity as a factor that could alter the market's perception of AI buildout linearity, suggesting "more capex discipline in the near-term" from hyperscalers like Alphabet and Amazon.
Lisa Shalett, Chief Investment Officer at Morgan Stanley Wealth Management, recommends gradually cutting chip exposure in favor of Big Tech names that possess an AI edge. She notes that the valuation premium on the Magnificent Seven megacaps has fallen to its lowest in over a decade, making hyperscalers appear "downright cheap." This pivot aligns with Morgan Stanley's view that investors may turn towards these AI-driven tech giants as the AI cycle shifts, alongside consumer discretionary, transport, and biotechnology shares.
Goldman Sachs, while acknowledging that companies may still beat estimates, cautions that high expectations mean results alone might not reignite the rally, emphasizing the importance of guidance and management commentary on how AI spending translates into profit. Conversely, JPMorgan views the recent pullback in chip stocks as a buying opportunity, placing semiconductors ahead of hyperscalers in its technology preferences, with strategist Mislav Matejka asserting that the chip upcycle is "not peaking anytime soon" and that significant supply is unlikely before $2028$. This highlights a split among investment banks regarding the future trajectory of AI-related stock performance.
The U.S. Philadelphia Semiconductor Index has declined approximately $14$% from its recent peak, and both Samsung Electronics and SK Hynix have seen drops of over $20$% from their highs, despite strong earnings expectations. While the AI investment cycle itself is not considered over by most banks, the core debate revolves around whether future growth is already priced into chip stocks and if the primary beneficiaries of AI spending will remain chipmakers or shift towards Big Tech and the large cloud firms building AI infrastructure.
