Wall Street is becoming increasingly picky about the sources of expectations for the next stock market rally.
As we look ahead to 2026, Morgan Stanley Making it clear that AI chips remain the most critical part of the tech landscape, there’s a caveat.
The company warned investors not to expect straight-line growth after several years of outsized growth.
Demand for computing power is growing at an impeccable rate, putting semiconductors at the center of the story for the third year in a row.
In terms of perspective, S&P 500 Index Published total returns were up to 26.3% In 2023 (according to Chevy Chase Trust), 25% 2024 and beyond 16% By 2025 (approx. 86% Cumulative earnings since 2023, according to Barron’s.
Moreover, close one third The main components of the S&P 500 Index are “Hao Qi,” some estimates put the figure as high as 37% According to Forbes, as of October this year.
At the same time, however, Morgan Stanley is countering even more delusional predictions that AI spending will continue to advance at an alarming rate without interruption. Therefore, the company believes that the future still looks strong, just unstable.
As a result, Morgan Stanley is sticking with a familiar group of chip leaders, focusing on areas where it believes market expectations are still mostly mispriced heading into 2026.
for Morgan StanleyThe artificial intelligence industry is entering a more standardized stage.
After several years of spectacular growth, analysts point to uneven growth, periods of consolidation and occasional slowdowns.
Over the long term, Morgan Stanley’s latest forecast puts the S&P 500 at By the end of 2026, there will be 7,800According to Bloomberg, this logic has more to do with “earnings grind” than bubble math.
More AI stocks:
The bank expects solid net profit expansion, led by AI-driven gains, without a valuation surge.
starting from friday 6,834.50 close, the target implies considerable 14% upside potentialAccording to CNBC.
As a result, Morgan Stanley focuses on businesses with clear earnings visibility, durable moats, and realistic valuations.
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Artificial Intelligence Processor:NVIDIA, Broadcom
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Data center connection: Astra Labs
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memory: Micron
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Equipment and manufacturing: Applied Materials, TSMC
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Analog chip: NXP Semiconductors, Analog Devices
Morgan Stanley chip script name NVIDIA (NVDA) and Broadcom (AVGO) While talk of custom ASICs continues to heat up, it remains its top processor name.
The company’s analysts believe that Nvidia is the product with the “best return on investment” as the powerful Vera Rubin platform rises in the market. Second half of 2026.
Vera Rubin is “on track” and is designed to provide a huge performance boost over Blackwell.
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According to Nvidia, the Vera Rubin platform exceeds 3.3 times faster Than Blackwell Ultra and provide up to AI power increased by 7 times in its top server settings.
Nvidia CEO Jensen Huang shared more details in an interview with Bloomberg Technology.
Plus, Broadcom is the cleanest way to play games Custom chips and networks Artificial intelligence infrastructure. Growing expectations for ASIC are a big reason why numbers continue to move higher.
Additionally, for investors looking for data center investments without shouldering the huge tech price tag, Astera Laboratories (ALAB) Still a relatively small name, but relevant to connections in hyperscale AI builds.
Morgan Stanley’s AI future involves more than just fancy processors.
It’s seeing strong support across memory, devices and select analog chip builds, areas that typically become more important once you scale.
Micron As data centers continue to absorb large amounts of high-bandwidth memory, memory remains the memory of choice, driven by tight supply and strong pricing power.
Even if growth doesn’t go as smoothly as forecast, demand is still healthy enough to keep conditions favorable.
On equipment, Morgan Stanley remains optimistic Applied Materials and TSMCboth involving the production of high-performance chips and capacity expansion related to artificial intelligence workloads.
Analog chips are also improving at a much slower pace, and Morgan Stanley sees significant opportunity there, stressing NXP Semiconductors its combination of growth and valuation, while Analog Devices Fundamentals remain attractive.
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This article was originally published by TheStreet on December 22, 2025, and first appeared in the Investment section. Click here to add TheStreet as your preferred source.