Wall Street's anxiety over a potential slowdown in artificial intelligence spending is overblown, according to Morgan Stanley.
Despite a softer tone around AI-related stocks this year, weighed down by tariffs and general macroeconomic uncertainty, the firm remains confident that demand for AI infrastructure remains robust.
"We have been highlighting the strong demand for inference chips recently, and that demand continues to strengthen," wrote Morgan Stanley analyst Joseph Moore in a note to clients on Friday.
Moore dismissed the idea that corporate AI investment is entering a "digestion phase" as “laughable,” given the escalating need for more computing power to support inference workloads.
Moore pointed to remarks from OpenAI’s Sam Altman and Alphabet’s Sundar Pichai as evidence that demand for high-performance chips remains insatiable. Both executives have publicly noted ongoing shortages of GPUs critical to supporting their AI ambitions.
"While Wall Street wrings its hands over a long list of valid macro concerns, Silicon Valley is grappling with an entirely different issue — a more than fivefold increase in tokens generated since the start of the year is stressing infrastructure and catalyzing a surge in investment to support expanding workloads," Moore noted.
AI stocks have endured a rough patch in 2025. Sentiment started to weaken after the January release of DeepSeek’s efficient large language model, which raised concerns that cloud hyperscalers might need fewer GPUs from Nvidia in the future.
Those fears intensified when President Donald Trump’s new wave of tariffs in April triggered broader market volatility. Since late January, shares of Nvidia have fallen 28%, while a basket of mega-cap tech firms deeply tied to the AI investment narrative has declined approximately 21% from recent highs.
Still, Moore remains bullish on Nvidia’s long-term trajectory, despite acknowledging near-term challenges. He noted that export restrictions and supply constraints related to Nvidia’s H20 chips would cap revenue growth over the next few quarters. However, he expects a significant acceleration once those headwinds abate, particularly in 2026.
"Nvidia had almost no revenue contribution from Blackwell chips last October. They generated $11 billion in January, and likely well over $30 billion this quarter," Moore highlighted. "We do not see that growth slowing anytime soon."
Indeed, Moore noted that recent channel checks reveal intensifying demand, further reinforcing his constructive outlook. He raised his calendar year 2026 revenue and earnings-per-share estimates for Nvidia by 10.7% and 11.9%, respectively. The analyst reiterated an "Overweight" rating on the stock and maintained a $160 price target, implying a 45% upside from current levels.
For wealth advisors, these developments offer an important reminder: while cyclical volatility can rattle investor confidence, the structural growth story underpinning AI infrastructure remains intact.
Forward-looking clients with a tolerance for volatility and a long-term investment horizon may continue to view strategic allocations to high-quality AI enablers — such as Nvidia — as a meaningful growth opportunity within diversified portfolios.
As Moore’s commentary illustrates, investors who look beyond short-term noise and focus on underlying secular trends may be better positioned to capture potential upside as AI-driven demand reshapes industries and markets over the coming decade.
