Chip Stocks Rally, SanDisk Surges Over 7%: Has the AI Infrastructure Stock Correction Ended?

Wilson noted that although the S&P 500 Index is not far from its record high, notable adjustments have already taken place within the index. Since mid-August, Morgan Stanley's Quality Factor Composite Index has risen by about 6%, while the equal-weighted S&P 500 Index has dropped nearly 4% over the same period, showing a divergence in performance across different types of stocks.

Earnings expectations show a similar change. The gap in earnings revision breadth between high-quality and low-quality stocks is close to 10%, reaching its second-highest level since 2010; meanwhile, the relative valuations of high-quality stocks remain near historical medians.

Under this analytical framework, opportunities in AI hardware stocks need to be evaluated on a company-by-company basis. If orders and earnings expectations continue to improve during a stock price pullback, valuation digestion could create more attractive opportunities. A significant prior drop alone is not enough to determine a company's investment value.

Morgan Stanley's assessment that the correction is nearing an end does not mean the market has finished bottoming out. Wilson still retains a scenario in which the correction could extend into November, believing that if long-term U.S. Treasury yields stabilize, earnings could once again become the primary driver of stock returns.

Earnings season also presents challenges. Among the companies that have already reported results, only 41% saw their stock rise on the day following their earnings release, indicating that earnings growth may not be sufficient to satisfy market expectations.

Morgan Stanley projects that AI capital expenditures by hyperscalers and emerging cloud service providers will reach $1.58 trillion in 2027. The firm expects earnings growth for AI-related companies to reach approximately 25% in 2027, compared with around 4% for non-AI companies.

If these expenditures materialize as expected, relevant hardware suppliers stand to benefit from order support. However, it will still take time to progress from customer budgets to actual procurement and then to supplier revenue and profit recognition, while product pricing, costs, and delivery schedules will also impact the final returns.

Both Micron Technology and Broadcom made Morgan Stanley's "High Quality + Upward Earnings Revision" screen, meeting criteria such as ranking in the top quartile of quality scores, seeing recent upward revisions to next 12-month EPS estimates, and holding an Overweight rating from Morgan Stanley.

This content was translated using AI and reviewed for clarity. It is for informational purposes only.