Morgan Stanley Says Memory Stock Pullback Is a Buying Opportunity

[Financial News] Morgan Stanley said that the recent share-price correction in U.S. memory semiconductor stocks is a buying opportunity, as investment in artificial intelligence (AI) data centers is expected to deepen the supply shortage in memory semiconductors through 2028. While short-term volatility is unavoidable, the firm said the long-term outlook for the memory sector remains bright because AI demand continues to outpace supply.
Joseph Moore, an analyst at Morgan Stanley, said in an investor note on the 20th local time that "this memory cycle is highly unusual because data center demand is effectively the only growth driver." He added that "mixed signals from other industries are shaking the memory market, but they are not changing the underlying supply-demand balance."
He explained that demand in consumer electronics, PCs, and smartphones has been uneven, and that this trend is temporarily affecting spot prices and inventories. He added that the recent decline in memory chip manufacturers' share prices reflects those concerns.
Moore said that "memory is not currently the sector offering the highest risk-adjusted return. We still rank NVIDIA and Broadcom as our top picks," but added that "the memory sector is rapidly closing the gap with them."
He said that recent meetings with data center buyers showed no sign that the memory shortage is easing. As a result, he expects memory prices in the third and fourth quarters to rise by at least 25% quarter on quarter on a like-for-like basis. That is above the previous forecasts from major brokerages, including Morgan Stanley.
He stressed that the longer-term supply shortage is an even more important factor. Moore said that "concerns that the memory shortage will deepen in 2027 and 2028 are stronger than ever," adding that "there is not enough memory supply to meet AI demand, and that does not appear likely to change."
He went on to say that "investor buying has already concentrated in memory-related stocks, and given the unusual nature of this cycle, intermittent corrections may also appear," but emphasized that "the recent weakness is actually a good entry point for long-term investors."

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