Morgan Stanley named Nvidia Corp. (NVDA) and Broadcom Inc. (AVGO) as its top picks in AI compute following the recent semiconductor sell-off. The firm identified memory stocks as a 'compelling entry point' after their pullback, according to a CNBC report citing analyst Joseph Moore's note on Monday. The VanEck Semiconductor ETF (SMH) fell nearly 9% last week, its worst single-week decline since March 2025, while the Nasdaq Composite was up 0.5% at the time of writing. Moore stated the firm's preferred AI investments remain compute names such as Nvidia and Broadcom, but memory stocks have become increasingly attractive. Multiple Wall Street firms said the sell-off has not materially changed their long-term outlook for AI infrastructure spending.
Wall Street Analysts Affirm AI Infrastructure Spending Outlook
Mizuho's Vijay Rakesh said there is still 'a lot of gas left in the tank,' according to the report. Rakesh cited AI capital expenditures, expanding gigawatt-scale power deployments and a persistent supply gap as factors that should continue to support semiconductor demand well beyond 2028.
JPMorgan said semiconductor stocks 'should soon start to find a bid' because additional supply is unlikely to materially alter the industry's supply-demand balance before 2028, the report stated. Analyst Mislav Matejka added that it is still too early to price in an industry inflection, with fundamentals likely to remain constructive despite recent volatility.
Goldman Sachs Reports Record Hedge Fund Selling in Tech Stocks
Goldman Sachs' Prime Services desk stated in a note that hedge funds pulled back from US tech stocks at a record pace over the past two months, according to a Bloomberg report. The note stated that hedge funds were net sellers in six out of the previous eight weeks.
'Amid continued volatility and sharp selloff across the semis/memory/AI infrastructure complex, the persistence and magnitude of selling since early June point to significant length reduction by tech investors, and some signs of capitulation are starting to emerge,' the firm stated in its note.
Goldman Sachs said that technology was the most net sold U.S. sector last week as investors cut long positions and added short bets. While technology hardware and IT services led the selling, semiconductors and software were also net sold.
The Invesco QQQ Trust (QQQ) is up 25% over the past 12 months, while the iShares U.S. Technology ETF (IYW) is up 35%.
FAQ
Which chip stocks did Morgan Stanley recommend after the sell-off?
Morgan Stanley named Nvidia Corp. (NVDA) and Broadcom Inc. (AVGO) as its top picks in AI compute, according to analyst Joseph Moore's note cited in a CNBC report. Moore also called memory stocks a 'compelling entry point' following the recent pullback.
What did Wall Street analysts say about AI infrastructure spending?
Mizuho's Vijay Rakesh said there is still 'a lot of gas left in the tank,' citing AI capital expenditures, expanding gigawatt-scale power deployments and a persistent supply gap as factors supporting semiconductor demand well beyond 2028. JPMorgan stated that additional supply is unlikely to materially alter the industry's supply-demand balance before 2028.
How did hedge funds respond to the semiconductor sell-off?
Goldman Sachs' Prime Services desk reported that hedge funds pulled back from US tech stocks at a record pace over the past two months, with hedge funds being net sellers in six out of the previous eight weeks, according to a Bloomberg report. Technology was the most net sold U.S. sector last week.
