Morgan Stanley is standing firm in its bullish stance on the artificial intelligence trade despite growing concerns about lower investment in AI technology. The bank’s analysts point to continued strong demand for GPU chips, particularly Nvidia’s high-performance processors, as evidence that the AI sector remains robust.
“The idea that we are in a digestion phase for AI is laughable given the obvious need for more inference chips which is driving a wave of very strong demand,” Morgan Stanley analyst Joseph Moore said in a note on Friday. Moore highlighted recent statements from OpenAI’s Sam Altman and Alphabet’s Sundar Pichai as proof that AI companies are still struggling to get enough GPU chips to meet their needs.
The AI market has faced headwinds this year, with AI stocks weakening amid fears of an AI slowdown. The trend was exacerbated by the introduction of DeepSeek’s efficient large language model in late January, which sparked concerns that cloud hyperscalers might need fewer GPU chips from Nvidia. The situation worsened after President Donald Trump imposed a wave of tariffs in early April, further depressing AI-related stocks.
Nvidia, considered a darling of the AI trade, has seen its shares plunge 28% since late January. Mega-cap tech giants closely tied to AI are down about 21% since their peak just a few months ago. However, Moore remains optimistic about Nvidia’s prospects. While acknowledging that supply constraints and export restrictions on its H20 chips might limit revenue growth in the near term, he believes that once these issues are resolved, the company will see significant growth in 2026.
Moore pointed to Nvidia’s rapidly increasing revenue from its Blackwell product line – from almost zero in October to $11 billion in January, and likely over $30 billion in the current quarter – as evidence of strong demand. The analyst has increased his calendar year 2026 revenue and earnings per share estimates for Nvidia by 10.7% and 11.9%, respectively. He maintains an “Overweight” rating on the stock with a $160 price target, representing potential upside of 45% from current levels.
