Morgan Stanley’s Wilson says the correction is in its final innings but chip stocks could fall up to 15% more

Morgan Stanley strategists led by Mike Wilson say support for semiconductor stocks could be as much as 15% lower than current levels^1,3. Chip stocks could fall that much further before bottoming, the bank warned².

Wilson is keeping Morgan Stanley’s year-end S&P 500 forecast of 8000². He is also flagging funding concerns for AI spending².

At the same time, Wilson says the market is in the “final innings” of its correction^4,5. That view frames the recent decline as an adjustment rather than the start of a deeper bear market^4,7. His message has been summarised as a call to get ready to buy, with the stock market’s correction almost over⁶.

Reading the two calls together

The views are not contradictory. Wilson sees the broad market near the end of its decline while one of its leading groups may still have more to give back^2,4.

The bank’s analysis links the adjustment to several forces. Slowing growth in the Federal Reserve’s balance sheet, capital scarcity and the midterm elections have exacerbated the adjustment, while quality stocks have consistently led⁷. The bank expects post-election relief for markets⁷.

The chip warning rests on the funding question². Doubts about how AI spending is financed weigh on the chipmakers that supply it^1,2.

Why it matters to investors

A target of 8000 for the S&P 500 signals that Morgan Stanley’s strategists remain constructive on the index as a whole². Their view of chip stocks is more cautious, with a floor they put as much as 15% below current levels^1,3.

That combination implies leadership could change if the correction ends. The bank says quality has consistently led during the adjustment⁷, which favours stronger companies over a broad rebound^2,7.

The timing also matters. The bank ties part of the pressure to the midterms and to tighter liquidity from the Fed’s slower balance sheet growth⁷. Its expectation of post-election relief depends on those pressures easing⁷.

What to watch is whether the funding concerns Wilson flags for AI spending ease or intensify². His team’s call on semiconductors gives investors a specific level against which to judge any further fall^1,3. His broader call that the correction is almost over will be tested in the same weeks^4,6.