①Morgan Stanley predicts that chip stocks will remain one of the best-performing sectors in the U.S. equity market next year and has released a list of "Top Chip Stocks for 2026," with NVIDIA, Broadcom, and Astera Labs ranking in the top three; ②Morgan Stanley analysts believe that the semiconductor industry's boom cycle is far from over, and the insatiable global demand for artificial intelligence (AI) computing power remains the key variable.
Morgan Stanley released a latest research report stating that the 'long-term bull market logic' for chip stocks remains intact, driven by an unprecedented artificial intelligence (AI) infrastructure boom and strong destocking momentum in traditional analog chips/MCUs (microcontrollers). Chip stocks could still be one of the best-performing sectors in the U.S. equity market next year.
Accompanying the bullish forecast is the list of 'Top Chip Stocks for 2026': $NVIDIA (NVDA.US)$ NVIDIA, $Broadcom (AVGO.US)$ Broadcom, and $Astera Labs (ALAB.US)$ ranked in the top three.
In the view of Morgan Stanley analysts, the semiconductor industry’s boom cycle is far from over, and the upside potential for chip stocks remains substantial.
"For three consecutive years, the biggest debate in the market has centered on AI semiconductors, with the index weight of the chip industry primarily dominated by AI chip companies. To date, the insatiable global demand for AI computing power remains the most critical variable," they wrote.
Morgan Stanley pointed out that NVIDIA and Broadcom are the bank's two top picks in the semiconductor sector.
The analysts explained, "As we write this, enthusiasm for ASICs is growing, with the market betting on very strong growth. However, as various bottlenecks emerge, we still believe NVIDIA will offer the highest return on investment in cloud computing, especially as the Vera-Rubin architecture begins ramping up production in the second half of 2026."
"Although leverage is limited, we still believe the market underestimates NVIDIA’s position," the report stated.
In addition, the bank assigned a cautiously optimistic 'in-line with the market' rating to $Advanced Micro Devices (AMD.US)$ and $Marvell Technology (MRVL.US)$ as both companies have the potential for 'substantial upside,' but uncertainties remain. Given its skepticism about Intel's foundry business, Morgan Stanley is more cautious about $Intel (INTC.US)$ Intel.
Astera Labs is the bank’s favorite small-cap stock in the data center space, particularly praising the company's advancement in rack-level/scale-up optical interconnect ecosystem solutions through its acquisition of aiXscale. The report emphasized that the company is aggressively moving into optical interconnects/silicon photonics technology within data centers.
On the other hand, Morgan Stanley also pointed out that growth in artificial intelligence may tighten the supply of memory and logic wafers in the memory and semiconductor equipment sectors. Therefore, $Micron Technology (MU.US)$ Micron Technology is the firm’s top pick in the memory market, although it is cautious about $SanDisk Corp (SNDK.US)$ also has an 'Overweight' rating.
In the chip equipment sector, $Applied Materials (AMAT.US)$ and $Taiwan Semiconductor (TSM.US)$ are Morgan Stanley's top two picks.
Finally, Morgan Stanley stated that the narrative foundation and pricing logic of parts of the analog chip market will remain largely the same as in 2025 – though progress is slow, it continues to improve. Therefore, the bank favors $NXP Semiconductors (NXPI.US)$ Semiconductor, considering it as 'the best combination of growth and value models in chip stocks'; whereas $Analog Devices (ADI.US)$ Semiconductor is more expensive but offers 'stronger growth potential within the analog chip segment.'
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Editor /rice