Two Wall Street heavyweights are sending mixed signals to investors navigating the AI trade, with JPMorgan urging clients to buy the recent dip in semiconductor stocks and Morgan Stanley suggesting a rotation away from chipmakers toward hyperscaler giants.
The Philadelphia Semiconductor Index, known as the SOX, slumped 5.4% last week in its second straight weekly decline, prompting JPMorgan strategist Mislav Matejka to call the weakness a buying opportunity. “The semiconductor upcycle is not peaking anytime soon,” Matejka wrote, noting that meaningful new chip supply is unlikely before 2028. Markets appeared to agree: the SOX opened 2.5% higher on Monday, with Nvidia, Applied Materials, Marvell, and memory stocks like Western Digital all bouncing sharply.
JPMorgan’s pecking order puts semiconductors first, followed by hyperscalers, and then what it dubs “AI at risk” plays—software, business services, and media companies vulnerable to cannibalization from AI tools. The bank expects broader market participation in the second half of 2026, with small caps and international markets poised to benefit as AI fades from being “the only story in town.”
In contrast, Morgan Stanley sees the recent chip weakness as evidence that market leadership is expanding beyond silicon. The brokerage’s strategists believe hyperscalers—Microsoft, Amazon, Meta Platforms, and other big-tech firms pouring billions into AI infrastructure—are now better positioned. “We also believe this cohort possesses attractive optionality within the AI ecosystem,” they wrote, citing strong core businesses and an underappreciated cost-cutting lever. Morgan Stanley expects the rotation to extend further, benefiting consumer discretionary, transport, and biotech stocks as Federal Reserve rate-hike expectations ease and oil prices fall.
For crypto markets, the tug-of-war among traditional equities could lift AI-related tokens that have mirrored tech sentiment. However, a broader equity rotation or a choppy market—Morgan Stanley warns of a “weaker equity market overall”—might dampen risk appetite, keeping the near-term impact neutral for digital assets.
