Morgan Stanley CIO Warns: Chip Stocks Clearly Overbought, AI Capex Growth Already Showing Signs of Slowing – finance.biggo.com

Morgan Stanley Wealth Management Chief Investment Officer Lisa Shalett recently issued a warning on the semiconductor industry, arguing that traditional chip manufacturers’ pricing power is coming under pressure as hyperscale cloud service providers accelerate the in-house development of lower-cost custom chips. She noted that excessive market optimism about the AI investment outlook has pushed related stocks to significantly elevated levels, and investors should exercise caution.
In an interview with Bloomberg Television’s “Surveillance” program on July 10, Shalett analyzed that the technical architecture of AI data centers is undergoing a redesign. Hyperscale cloud service providers, including Meta, Google, and Amazon, are actively developing their own proprietary chips to reduce reliance on external suppliers. “When supply chain bottlenecks emerge and some players exploit the situation to earn excess profits, engineers start looking for lower-cost alternatives,” she said. This, she noted, is a long-standing cyclical pattern in the semiconductor industry.
She further pointed out that, judging by the performance of semiconductor ETFs and the Philadelphia Semiconductor Index, the semiconductor sector is in a “clearly overbought” state. According to data compiled by Bloomberg, the Philadelphia Semiconductor Index’s price-to-earnings ratio has expanded more than threefold since 2022, indicating significant market valuation inflation.
Shalett’s remarks came as South Korean memory giant SK Hynix completed a $26.5 billion (approximately NT$850 billion) fundraising and officially listed on the Nasdaq in the U.S. on July 10, setting a new record for the largest fundraising by a foreign company listing in the United States. However, SK Hynix’s share price has experienced sharp volatility recently, falling about 26% in the South Korean market from its peak last month, reflecting growing market concerns over high valuation risks.
Despite the emerging warning signs, Shalett also acknowledged that the AI investment theme continues to attract ample capital inflows, and overall trading enthusiasm has yet to subside.
Beyond the issue of chip pricing power, Shalett also views Meta Platforms’ recent strategic adjustments as an important signal. Meta CEO Mark Zuckerberg revealed in an interview last week that he is evaluating whether to lease out some of the company’s AI infrastructure to external customers to improve asset utilization efficiency. Shalett believes this indicates that major tech companies have begun internal discussions about the pace, speed, and return on investment of AI spending, and are considering how to advance commercialization and monetization strategies earlier. She stated bluntly: “We are in the early stages of AI capex growth beginning to slow.”
Once capital expenditure growth decelerates, coupled with the increasing prevalence of custom chips, chip manufacturers’ current high pricing power and elevated valuations could face greater correction pressure. The market will closely monitor the capital expenditure trends of tech giants and the tangible impact of the custom chip trend on the broader semiconductor supply chain.
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