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Investing.com -- The debate over which AI chip stock to own heading into 2026 remains central for investors, and Morgan Stanley says the outlook for next year still strongly favors the sector’s leaders.
In a 2026 semiconductor outlook, Morgan Stanley analyst Joseph Moore wrote that “the picture for CY26 appears very strong,” with AI spending supported by “the scaling up of token growth for complex inference, around usage of the models, not training.”
Moore acknowledged ongoing skepticism around longer-term AI assumptions, noting it has “some skepticism on the 5-year views that make 2025 strength look like a rounding error.”
Still, the bank said visibility for 2026 remains solid, helped by recent capital raises among major model developers and sustained demand for compute.
Within processors, Morgan Stanley “remain[s] OW NVDA and AVGO, maintaining a preference for NVDA.”
“[Nvidia is] still the nucleus for the AI trade, and at an undemanding multiple we think it’s hard to look elsewhere in AI,” said Moore.
The analyst highlighted “growing enthusiasm for ASIC, where growth will be strong,” but added that “as various bottlenecks emerge we continue to think that NVIDIA will be the highest ROI solution in cloud, particularly as Vera Rubin ramps in 2h26.”
Morgan Stanley also believes “the market is underestimating NVIDIA’s position.”
Broadcom remains favored as part of Morgan Stanley’s overweight positioning, but Nvidia stands out as the preferred name.
However, the bank wrote that “on the GPU alternatives debate, we prefer AVGO as the proven and enduring accelerator story beyond CY2026.”
“We really like the growth story here, and while we tend to be vocal on GPUs maintaining market share leadership, we still see very strong growth potential for both custom silicon and networking at Broadcom,” Moore added.