Morgan Stanley: Global Technology 2026 Outlook – A Tale of Two Halves
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Morgan Stanley projects global semiconductor revenue will reach USD 1.6 trillion in 2026, driven by memory and logic chips, representing approximately 96% year-over-year growth. The firm anticipates AI spending and commodity tailwinds will persist through the first half before demand destruction risks emerge in the second half.
Memory remains the critical AI bottleneck within a capacity-constrained cycle, with unusually long order visibility. This dynamic could catalyze unprecedented capital expenditure through 2028, with EUV lithography potentially becoming the next constraint. The rise of agentic AI demands not only higher performance but more coordinated systems, creating bottlenecks across CPUs, foundries, substrates, and equipment.
Chinese technology stocks significantly outperformed the S&P technology sector in 2025, aided by dollar weakness, rising commodities, and a domestic tech recovery. The firm maintains an overall neutral stance on global technology while highlighting pronounced subsector divergence. Bullish calls include Korean tech, US semiconductors, and Japanese semiconductor equipment, while US IT hardware and Japanese electronic components are viewed bearishly.
Morgan Stanley recommends a barbell strategy combining AI leaders with strong pricing power and oversold names with reasonable valuations. The firm is overweight NVIDIA, citing the industry's highest cloud ROI solutions, particularly as Vera Rubin ramps in H2 2026. Preferred memory names include Samsung, SK Hynix, and Micron. In equipment, ASML, ASMI, AMAT, and MKSI are favored, alongside foundry leader TSMC. Oversold analog and consumer semiconductor companies with strong cash flows offer portfolio diversification during drawdowns.