Damo shouted at the bottom of the semiconductor: it has gone too far, and the risk-return has improved markedly! Preferred Nvidia (NVDA.US), Broadcom (AVGO.US)

The Zhitong Finance App learned that Morgan Stanley published a research report stating that after the recent market correction, investors are advised to lay out targets related to the semiconductor sector. The bank believes that the current round of decline appears to have “gone too far,” and that the risk-benefit ratio of the targets covered has “improved significantly.”

The bank acknowledged that recent events have indeed brought certain risks, but the visibility of the industry sentiment is still “extremely strong”. Leading companies with sufficient capital will continue to increase their investment for many years, and demand is continuous.

“Our biggest risk is actually panic itself,” the bank's analysts wrote in the research report. Even new cloud vendors, which are being dragged down by high interest rates and putting pressure on operations, are still unable to obtain sufficient computing power resources.

In response to market concerns that land, electricity, and plant/computer room construction (LPS) bottlenecks may limit data center expansion, Morgan Stanley refuted pessimism.

After communicating with industry chain buyers, the analyst said, “At present, LPS will not be the biggest limiting factor in 2027; the core contradiction is that even if there is compliant and usable computer room space, there aren't enough chips to fill it.”

The report also mentioned that there is pressure to slow down the original computing power deployment plans in Ohio, Texas, etc., but analysts pointed out that the industry is speeding up the search for LPS alternatives outside the US or in states with more friendly policies.

Morgan Stanley has given a clear ranking of semiconductor segmentation racetracks, with the GPU/XPU computing power track ranking first.

Analysts said, “Computing power is our preferred segmentation direction, and demand remains high; no fab model can also cushion downward pressure on profit margins when demand weakens, and the valuation level is attractive.” The report focuses on recommending Nvidia (NVDA.US) and Broadcom (AVGO.US), which have corresponding price-earnings ratios of about 9 times in 2028.

The memory chip segment is in second place. Morgan Stanley believes that after the storage sector's valuation continues to be compressed, the upward space is already very attractive. In particular, it is pointed out that the investment value of SanDisk (SNDK.US) and Micron (MU.US) at current prices is quite prominent.

On the microprocessor circuit, Morgan Stanley's views are clearly at odds with mainstream market consensus, and their attitude is cautious.

Analysts said that Intel (INTC.US) remains on the sidelines, even though Intel is the biggest beneficiary in improving the performance of products with the same specifications.

Although CPU demand is still strong and supply continues to be scarce, the bank determined that the CPU shortage cycle is shorter than that of memory chips, and at the same time, the valuation is higher. Therefore, under the mandatory ranking framework, the overall CPU circuit is at the bottom; even so, within the CPU target, the line is more optimistic about AMD (AMD.US) than Intel.