Micron, AMD rise as Morgan Stanley spots shift to hyperscalers

Micron, AMD and other chipmakers rose on Monday even as Morgan Stanley wrote that investors are beginning to look beyond semiconductor makers and toward large cloud and internet companies that are building AI infrastructure.

Micron climbed about 4.1%, AMD rose roughly 9.4%, Nvidia gained 0.6% and Marvell jumped about 5.1%.

In a note, Morgan Stanley’s strategists wrote that hyperscalers have “attractive optionality within the AI ecosystem,” pointing to their strong core businesses, the ability to develop and implement agentic application layers and an underappreciated lever for cutting costs.

The firm noted those companies have sharply increased capital spending to build AI infrastructure. Investors continue to debate whether those expenditures will generate sufficient returns. Morgan Stanley added there could be “more capex discipline in the near-term” and observed that hyperscaler stocks had already gone through a period of underperformance.

The Philadelphia Semiconductor Index climbed about 11% in June but has fallen nearly 14% from a record high set last month. Even after the pullback the index remains roughly 123% higher since September, reflecting strong demand for AI chips and data-center hardware. A UBS basket tracking hyperscaler stocks has declined about 2% over the same period.

Morgan Stanley warned the semiconductor retreat could raise volatility across equities because several large chip companies have become major drivers of market returns. The strategists described recent sector shifts as part of alternating leadership among AI-related groups over the past two years and cautioned investors to expect a “choppy/weaker equity market overall.”

Wilson kept a year-end target of 8,000 for the S&P 500, implying roughly 7% upside from current levels. The bank also expects the rotation to extend to consumer discretionary firms, transportation stocks and biotechnology names as expectations for further Federal Reserve rate hikes ease and crude oil prices fall. Other Wall Street strategists have expressed similar views that market leadership may broaden in the second half of the year.