The stock market has seen fewer AI deals this year amid tariffs and concerns about an AI slowdown.
But Morgan Stanley dismissed concerns about a drop in AI spending, citing continued demand for chips.
“We’ve been highlighting this strong inference demand recently, and it continues to strengthen,” Morgan Stanley said.
One of Wall Street’s top banks isn’t worried about AI deals despite concerns about a drop in corporate investment in 2025.
“The idea that we’re in the digestion phase of AI is ludicrous given the clear need for more inference chips that is driving a wave of very strong demand,” Morgan Stanley analyst Joseph Moore said in a note Friday.
Moore pointed to recent comments from OpenAI’s Sam Altman and Alphabet’s Sundar Pichai as evidence that AI companies still can’t get enough GPU chips.
“While Wall Street is grappling with a host of very real concerns, Silicon Valley’s attention has shifted to a very different challenge — a more than fivefold increase in token production since the start of the year, which has put a lot of pressure on the ecosystem and driven a surge in investment to handle those workloads,” Moore explained.
AI stocks have been particularly weak so far this year, a trend sparked by DeepSeek’s highly efficient large-scale language model, which debuted in late January. The model sparked concerns that cloud hyperscalers might need fewer Nvidia GPU chips to develop their AI capabilities.
Fears of an AI bubble intensified in early April when President Donald Trump unleashed a wave of tariffs.
Shares of AI darling Nvidia have plunged 28% since late January, and the big tech giants that are closely tied to AI trading are down about 21% since their peak a few months ago.
Speaking of Nvidia, Moore acknowledged that supply constraints and export restrictions on its H20 chip could limit the company’s revenue growth in the coming quarters. Once supply constraints are resolved, though, the company should see significant growth through 2026.
“NVIDIA had almost no revenue from Blackwell in October, $11 billion in January, and could be well over $30 billion this quarter,” Moore said, adding that he doesn’t expect growth to slow anytime soon.
“Based on our surveys, this demand comment has intensified over the last few days,” Moore said. “We’ve been highlighting this strong inference demand recently, but it continues to strengthen.”
Moore raised his 2026 revenue and earnings per share estimates for Nvidia by 10.7% and 11.9%, respectively, adding that the chip giant remains a “top pick.”
The analyst reiterated his “overweight” rating on Nvidia and set a $160 price target, implying a 45% upside from current levels.
