A dizzying rally in Taiwan’s artificial intelligence stocks is showing signs of wear, with Morgan Stanley calling for caution amid stretched valuations.
(Bloomberg) — A dizzying rally in Taiwan’s artificial intelligence stocks is showing signs of wear, with Morgan Stanley calling for caution amid stretched valuations.
Taiwan Semiconductor Manufacturing Co., the world’s biggest chip company and a key supplier to Nvidia Corp., has dropped more than 6% from a peak reached in June. Smaller firms have pulled back even more, with Wistron Corp. and Quanta Computer Inc. set for their worst week on record just days after hitting an all-time high.
Cracks are appearing in the island’s tech rally after investors piled into AI-related shares to capitalize on rising demand for chips and original design manufacturing. A gauge tracking AI firms has been in overbought territory for most of the year, raising concerns about frothy valuations.
“While difficult to call a top amid a market driven by the AI-thematic and retail investors, we think a lot has been priced in and move to the sidelines,” Morgan Stanley analysts including Terence Cheng wrote in a note on Wednesday. The brokerage also downgraded Taiwan stocks to equal-weight.
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