Morgan Stanley Sounds Alarm on Fading Chip Stock Momentum

Morgan Stanley has issued a warning about the fading momentum in chip stocks. The firm cited a note that pointed to investors rotating out of the sector, leading to weakness among major tech companies.

The strategist's team, led by Chief Investment Officer Michael Wilson, identified Microsoft, Amazon, and Meta as their top picks among AI hyperscalers due to their strong core businesses.

Microsoft shares have fallen over 17% year-to-date, while Meta shares are down more than 10%. In contrast, Amazon shares have gained over 7% during the same period.

Morgan Stanley also cautioned that weakness in chip stocks could lead to a bumpy ride for the broader stock market. The firm expects consumer discretionary, biotech, and transport sectors to benefit from the rotation out of chip stocks.