Morgan Stanley dampens enthusiasm: Chip manufacturers’ pricing power under pressure, AI capital expenditure begins to slow, U.S. semiconductor stocks are “significantly overbought.”

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Lisa Shalett, Chief Investment Officer of Morgan Stanley Wealth Management, stated that as more signs emerge indicating that chip manufacturers' pricing power is being limited, investors should remain cautious regarding chip stocks. She believes that the market's optimistic expectations for AI-related spending may have already pushed these stocks to excessively high levels.

In an interview on Friday, Shalett said:

“We are seeing the AI data center technology stack being redesigned, with more and more cost-effective self-developed chips being incorporated. These chips are being independently developed by many hyperscale cloud service providers.”

Shalett's warning comes as SK Hynix officially listed on Nasdaq on Friday, raising $26.5 billion, setting a record for the largest IPO fundraising by a foreign company in the U.S. However, SK Hynix has recently experienced dramatic fluctuations in the Korean domestic market, with its share price down 26% from last month’s peak.

Shalett said:

“Overall, capital inflow into this trading theme remains very ample.”

But she pointed out that the industry’s current development is repeating a familiar pattern:

“When there are supply chain bottlenecks and some companies—such as certain memory chip manufacturers—seize the opportunity to gain excessive profits, engineers begin to look for more cost-effective alternatives.”

Earlier this week, Shalett noted in an investment report that signs of “significant overbought” are appearing in the semiconductor sector. On the program, she further stated that multiple indicators—from semiconductor ETFs to the Philadelphia Semiconductor Index—all support this view.

According to data compiled by Bloomberg, since 2022, the price-to-earnings ratio (PE) of the Philadelphia Semiconductor Index has more than tripled.

Shalett also mentioned that the recent adjustment of AI strategy by Meta Platforms is another noteworthy signal, showing that some tech giants may begin to reassess capital expenditure plans worth hundreds of billions of dollars.

Meta CEO Mark Zuckerberg said in an interview this week that he is considering whether renting out part of Meta’s AI infrastructure to external clients could generate greater value.

Regarding this, Shalett commented:

“This, to some extent, indicates that companies have begun to discuss the pace, speed, and return on investment of these expenditures, while also considering how to achieve commercialization and monetization earlier.”

She concluded:

“I believe we are in the early innings of a slowdown in AI capital expenditure growth.”

Risk Warning and DisclaimerThe market has risks, and investment must be done cautiously. This article does not constitute individual investment advice and does not take into account the specific investment objectives, financial situations, or needs of any particular user. Users should consider whether any opinions, views, or conclusions in this article are suitable to their specific circumstances. Invest accordingly, and bear your own responsibility. ```