Morgan Stanley Tells You to Dump Chip Stocks – Here's Why Hyperscalers Are the New AI Bet
Investors are shifting money out of semiconductor stocks and into large cloud computing companies, according to Morgan Stanley, as the artificial intelligence trade enters a new phase.
Global chip stocks have been on a volatile ride in recent weeks, and investors are now searching for fresh confirmation that the artificial intelligence trade still has momentum [190192]. Samsung Electronics Co. may deliver that answer on Tuesday when it releases a major update on its latest AI-powered memory chips, a key component for data centers and AI servers [190091][190192].
Meanwhile, South Korean chipmaker SK hynix has filed for a landmark initial public offering on the Nasdaq stock exchange, aiming to raise approximately $28 billion [190077]. The company is a leading supplier of high-bandwidth memory chips, which are critical for Nvidia’s AI processors [190091][190077].
But Morgan Stanley strategists, led by chief investment officer Mike Wilson, warn that investors are rotating out of semiconductor stocks and into "hyperscalers" – large cloud computing companies that operate massive data centers, such as Amazon Web Services, Microsoft Azure, and Google Cloud [190172]. Wilson argues that the next phase of growth will favor these infrastructure providers rather than the hardware makers, and that this move will limit overall market gains [190172].
Citi analysts have also placed Micron Technology and Qualcomm under a "catalyst watch," signaling possible price swings. For Micron, Citi sees a potential boost from strong demand in memory chips used in artificial intelligence, but warns that any slowdown in AI spending could hurt the stock [190157].
SpaceX is set to join the Nasdaq-100 index on Tuesday, signaling growing investor interest in space and AI-related technology [190091][190093]. However, the company will enter with a relatively low weight, meaning it will barely affect the overall index [190093].
The combination of steady borrowing costs, as the Federal Reserve is expected to signal a slower pace of rate increases, and strong AI investment may set the tone for the entire quarter [190069].