Morgan Stanley forecasts that AI companies will issue $570 billion worth of bonds globally this year. [Getty Images]
Morgan Stanley forecasts that AI companies will issue $570 billion worth of bonds globally this year. [Getty Images]

Morgan Stanley has characterized the recent pullback in memory chip share prices as a buying opportunity for long-term investors, citing stronger-than-expected demand from AI data centers and a supply shortage likely to persist through 2028.

Joseph Moore, a Morgan Stanley analyst, said in an investor note Monday that "the recent weakness in memory share prices offers a good entry point," adding that "long-term concerns about memory shortages deepening through 2027 and 2028 are stronger than ever."

Moore described the current memory chip cycle as unusual compared with past cycles, noting that AI data center investment is effectively the sole growth driver. Mixed signals from consumer electronics, PC and smartphone markets are creating only short-term noise in spot prices and inventory levels, he said, while core demand continues to be led by data centers.

He attributed the recent share price weakness in memory chips to those mixed consumer market signals, and said AI demand itself has not slowed.

Moore said meetings with data center procurement managers in recent days showed no signs of easing in the memory supply shortage. He forecast memory chip prices to rise at least 25% quarter-on-quarter on a like-for-like basis in the third quarter — a level that exceeds estimates from Morgan Stanley as well as other major brokerages.

"Memory supply is not sufficient relative to AI demand, and we do not see that changing," he said, adding that a prolonged supply shortage remains highly likely over the long term.

However, Moore still ranked Nvidia and Broadcom as his top picks on an investment-attractiveness basis. "The risk-reward profile is best for Nvidia and Broadcom," he said, while noting that the recent decline in memory share prices is rapidly narrowing the investment-attractiveness gap between memory stocks and those two names.

He added that memory-related stocks already attract concentrated investor attention, making volatility unavoidable, but said the recent weakness "will prove to be a good buying opportunity for long-term investors."


sjy@heraldcorp.com