Morgan Stanley Wealth Management’s top investment strategist just told the AI bulls something they probably don’t want to hear: the semiconductor trade might be running out of runway.
Lisa Shalett, the firm’s Chief Investment Officer, warned on June 5 that investors are conflating temporary pricing power in chip stocks with genuine, lasting productivity improvements. In a market where everything with “AI” in the pitch deck gets a premium valuation, that distinction matters more than most people think.
The seventh inning stretch
Shalett’s core argument is deceptively simple. The AI capital expenditure boom that has powered semiconductor stocks to eye-watering valuations isn’t in its early stages. It’s closer to what she called the “seventh inning,” borrowing from baseball to suggest we’re much nearer to the end than the beginning.
The numbers backing that thesis are hard to ignore. According to Shalett, the AI-driven rally has accounted for roughly 75% of S&P 500 gains and 80% of its profits over recent periods. Toss in the fact that AI-related spending represents about 90% of recent capital expenditures, and you’ve got a market that’s essentially a one-trick pony wearing a very expensive saddle.
