Two of Wall Street's biggest banks have given opposite advice on the same artificial intelligence (AI) trade. JPMorgan says the recent dip in AI chip prices is a buying opportunity, while Morgan Stanley says it's time to move on.
JPMorgan told clients that demand for AI chips remains strong while supply stays tight, and that meaningful new chip capacity won't arrive until 2028. This hands chipmakers real pricing power, according to the bank.
Morgan Stanley, however, sees it differently. Chief Investment Officer Michael Wilson says the momentum behind chip stocks is fading after they led the entire rally. Chipmaker earnings estimates have been raised so fast that they now sit at historic extremes.
Nvidia's upcoming earnings could provide a key clue as to whether AI chip demand remains strong. If hyperscalers stick to their spending plans, it would support Wilson's rotation theory. However, if they suddenly cut back on AI spending, it could spell trouble for chips and crypto alike.