Morgan Stanley Finds Wall Street’s Concern Over AI Slowdown Overblown
Wall Street’s Confidence in AI Amid Concerns
Current Sentiment on AI Investments
Despite concerns about declining investments in artificial intelligence (AI) among companies in 2025, Morgan Stanley analyst Joseph Moore is optimistic about the potential of the AI sector. In a recent note, he remarked that the assertion that the industry is experiencing a "digestion phase" is unfounded. He emphasized the growing necessity for inference chips, driving a robust demand in the AI market.
Strong Demand for GPU Chips
Moore highlighted the statements from key figures like Sam Altman of OpenAI and Sundar Pichai of Alphabet, illustrating that AI firms still face significant shortages in GPU chips. This ongoing demand presents a stark contrast to Wall Street, where investors express numerous concerns regarding the AI market’s current state. He pointed out that, while Silicon Valley has redirected its focus to handle increased workloads, the growth of token generation has skyrocketed by over five times since the beginning of the year.
The Impact of Recent AI Developments
The AI industry’s stock performance has been subdued this year, particularly following the introduction of DeepSeek’s efficient large language model in late January. This model raised fears that major cloud providers might require fewer GPU chips from leading manufacturers, such as Nvidia, potentially affecting profits. Furthermore, in early April, tariffs imposed by former President Trump led to increased anxiety regarding the sustainability of the AI sector.
Performance of Major AI Companies
Nvidia, often regarded as a high-profile player in the AI field, has seen a significant decline in its stock prices—down 28% since late January. Other large technology companies closely associated with AI have dipped roughly 21% from their peaks in recent months. Despite this downturn, Moore acknowledged that Nvidia is facing supply shortages and export restrictions regarding its H20 chips, which may limit revenue growth in the short term. However, he anticipates a significant recovery and growth opportunity once these issues are resolved, with projections of substantial revenue increases by 2026.
Future Growth Expectations for Nvidia
Moore was particularly upbeat about Nvidia’s revenue projections, stating they previously had negligible revenue in October but made $11 billion in January and expect to exceed $30 billion in the current quarter. According to his findings, the demand for AI inference capabilities has surged recently, with indications that this trend will continue to intensify.
Revenue Forecast Adjustments: Moore has adjusted his estimates for Nvidia’s revenue and earnings per share for the year 2026, raising them by 10.7% and 11.9%, respectively. He maintains that Nvidia remains one of his top stock picks in this sector.
- Market Rating: Analyst Joseph Moore has reiterated an "Overweight" rating for Nvidia, establishing a target price of $160—indicating a potential upside of 45% from where the stock currently trades.
Summary of Current Market Dynamics
The overall environment for AI investments is marked by cautious optimism, with experts arguing that the demand for chips will drive continued investment in the sector. While some industry players may wrestle with immediate concerns, the long-term outlook suggests that AI will remain a vital and growing area of focus for technology and investment alike. Morgan Stanley’s insights lend a compelling perspective to the conversation surrounding the future of AI in finance and technology.
