Morgan Stanley Upgrades Greater China Semiconductor Sector to Attractive

🗝️ Key Points

• Morgan Stanley has upgraded its rating for the Greater China semiconductor industry from "In-Line" to "Attractive." The firm cites that as macroeconomic factors such as tariffs.
• This could lead to the valuation of the Greater China semiconductor sector catching up with its U.S.
• counterparts.Analysts, including Charlie Chan, highlighted that both global and Chinese demand for artificial intelligence continues to be strong.

Morgan Stanley has upgraded its rating for the Greater China semiconductor industry from “In-Line” to “Attractive.” The firm cites that as macroeconomic factors such as tariffs and foreign exchange rates are gradually absorbed, the demand for AI remains robust. This could lead to the valuation of the Greater China semiconductor sector catching up with its U.S. counterparts.

Analysts, including Charlie Chan, highlighted that both global and Chinese demand for artificial intelligence continues to be strong. Based on TSMC’s initial CoWoS capacity projections for 2026, cloud AI semiconductors are expected to grow by 30%-40%. This suggests that the PEG (Price/Earnings to Growth) ratio for AI semiconductor stocks remains below 1.

TSMC’s (TSM, Financial) major concerns have either been addressed, such as forming a joint venture with Intel and AI demand, or are expected to be resolved soon, like semiconductor tariffs. Additionally, there are positive developments outside the AI sector, including the expanding market share of Chinese automotive semiconductors and stronger-than-expected general server demand.

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