Morgan Stanley and UBS call AI selloff overdone, brace for Nvidia earnings

Wall Street's heavyweights spent the weekend telling clients the AI rout was a mistake. Morgan Stanley said the selloff looked overdone and recommended buying the drop, while UBS analysts argued markets had turned too negative on AI political risk, AI credit risk and AI spending. HSBC went further, using the correction to add equity exposure again and leaning into tech stocks in the US and Asia.

The next real test lands on November 17, when Nvidia reports earnings after the close. The chip giant is expected to post a more than 12% quarterly rise in data center revenue, according to investing.com. Morgan Stanley and HSBC both flagged coming events, including AI lab Anthropic's IPO, as bigger swing factors for the trade than any political noise out of Washington.

Morgan Stanley's team framed the worst-case regulatory scenario as a timing problem, not a cancellation. It said the ultimate impact would be pushing some projects from 2028 into 2029, rather than derailing the capex story. In the note, the analysts argued this could elongate the AI capex cycle with positives including a smoother supply-demand rebalancing across the data center supply chain, an improved credit outlook, and higher lease rates for compute.

The broker stayed positive on AI hyperscalers and pointed to opportunities across chipmakers, naming Nvidia, plus data storage and optical networking firms. HSBC singled out Anthropic's planned listing as the main catalyst in the coming weeks, the event it is positioning around.

Jefferies equity analyst Jane Gibbons called the November 5 selloff reactionary rather than a fundamental reset. She noted that historically, daily declines of more than 4% have been followed by strong forward returns, with the S&P 500 gaining 11.9% over the following six months and more than 20% over 12 months.

The bulls are also waving off the political threat. The brokerages said the risk of extreme regulation of data center developments under a Democrat-controlled Congress is unlikely to play out, a fear that helped fuel last week's slide.