Morgan Stanley’s Lisa Shalett has urged investors to remain cautious on semiconductor stocks, arguing that signs are emerging that chipmakers’ pricing power is weakening despite the AI-driven rally.
“We are seeing the AI data center tech stack, if you will, being re-engineered to include lower cost proprietary chips that many of the hyperscalers are now designing themselves,” Shalett, chief investment officer at Morgan Stanley Wealth Management, said, according to a Bloomberg report.
Her comments come as South Korean chipmaker SK Hynix began trading on the Nasdaq after raising $26.5 billion in the largest-ever US initial share sale by a foreign company. The stock has been volatile in its home market, falling 26% from last month’s peak.
“There is ample capital still available broadly to this trade,” Shalett said. However, she noted that the semiconductor industry is witnessing a familiar trend: “Where supply chains get bottlenecked and folks are extracting excess rents as some of the memory chip guys are, the engineers get to work” to develop lower-cost alternatives.
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In an investor note earlier this week, Shalett described semiconductor stocks as “meaningfully overbought.” Speaking on Surveillance , she said the trend was evident across chip-focused ETFs and the Philadelphia Semiconductor Index, whose price-to-earnings ratio has more than tripled since 2022, according to Bloomberg data.
Shalett also cited Meta Platforms’ evolving AI strategy as a sign that some Big Tech companies may be reassessing their massive AI infrastructure investments. Meta CEO Mark Zuckerberg recently told Bloomberg that the company is evaluating whether parts of its AI infrastructure could generate greater value by being rented out to third parties.
“It kind of signals that there are conversations about the rate and speed and return on investment on some of this and how can they pull forward their monetization strategies,” Shalett said. “I think that we’re in the early innings of the beginning of that deceleration in the capex process now.”
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
