Morgan Stanley: Semiconductors Face Additional 15% Downside, Capital Flows Toward Consumer Durables and Transportation

According to Morgan Stanley's equity strategy report issued on July 20, the semiconductor sector still carries significant downside risk, with models suggesting a potential decline of around 15% in the near term. Over the past two months, consumer durables and transportation stocks have outperformed the S&P 500 by approximately 12 percentage points as capital flows shift away from semiconductors.

Within the technology sector, Morgan Stanley recommends overweighting cloud giants (Microsoft, Google, Meta, Amazon) while underweighting semiconductors. The four tech giants' equal-weighted price-to-earnings ratio has fallen to 21 times. Morgan Stanley's year-end target for the S&P 500 is 8,000 points, with 7,000 points representing key technical support.