Morgan Stanley Warns of Semiconductor Rotation as Chip Index Falls 14% From Recent Highs

According to Morgan Stanley's research team on Monday, July 6, capital is rotating away from U.S. semiconductor stocks—which have surged 123% year-to-date—toward underperforming mega-cap cloud service providers like Amazon AWS, Microsoft Azure, and Meta. The Philadelphia Semiconductor Index has retreated approximately 14% from recent highs, while the UBS Mega-cap Cloud Index declined 2% over the same period. Michael Wilson, Morgan Stanley's chief U.S. equity strategist, attributed the shift to cooling Federal Reserve rate hike expectations and declining oil prices, noting that valuation divergence between sectors "cannot persist indefinitely."
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