The tech selloff is 'healthy' and 'good for the markets', says Morgan Stanley's Andrew Slimmon
Speakers
Andrew Slimmon
— Senior Portfolio Manager, Morgan Stanley Investment Management
Summary
Andrew Slimmon, senior portfolio manager at Morgan Stanley Investment Management, interprets the global tech selloff as a healthy correction driven by crowded momentum trades and Fed rate-hike fears rather than overvaluation. He remains bullish on AI beneficiary stocks—memory, chipmakers, and semiconductor equipment—because earnings revisions support current valuations, and he views sharp pullbacks as buying opportunities. He recommends adding financials for non-correlated protection and is optimistic on the S&P 500 due to consistently rising earnings estimates.
- The tech selloff is healthy, caused by crowded momentum trades and Fed tightening expectations, not fundamental overvaluation.
- AI beneficiary stocks (memory, chipmakers, semiconductor equipment) are not expensive; earnings revisions have kept pace with price gains.
- Sharp declines in AI stocks are buying opportunities because AI compute demand remains far above supply.
- Semiconductor equipment makers are specifically endorsed as an AI beneficiary play.
- Financials offer an attractive non-correlated position with good earnings and underperformance relative to the AI-driven market.
- The broad S&P 500 has further upside as forward earnings estimates continue to rise and multiples have not expanded.
- Overconcentration in AI names is risky; diversifying with sectors like financials helps inoculate a portfolio during tech selloffs.
Ideas
Buy AI beneficiaries on the pullback.
AI beneficiaries—memory/chip stocks and semiconductor equipment manufacturers—are not expensive despite being crowded. Earnings revisions have validated their valuations. Sharp selloffs driven by momentum traders are healthy and present buying opportunities because AI compute demand is very high and supply is still catching up, and the pullback deflates euphoria before it becomes a bubble.
Buy financials for non-correlated protection.
Financials have reported very good earnings but their stocks have not performed well as the market focused on AI beneficiaries, making them an attractive non-correlated position that can inoculate a portfolio against drawdowns in crowded AI trades.
S&P 500 has further upside ahead.
He is optimistic on the S&P 500 because earnings revisions have kept pace with market gains so multiples haven’t expanded, and forward earnings estimates continue to move higher, implying further upside for the broad market.
