Morgan Stanley: Chip Stock Correction Is Nearing Its End, S&P 500 Year-End Target at 8,000

Morgan Stanley chief equity strategist Mike Wilson is holding to his year-end S&P 500 target of 8,000, even as enthusiasm for AI trades cools and U.S. equities come under pressure. The firm's tactical downside target sits at 7,100–7,200, just below the 200-day moving average, with the base case unchanged at 8,000. Wilson said a run of upcoming events, including the midterm elections, should mark the end of the current correction. He stays relatively cautious on semiconductors, warning that support could sit well below current levels, though selling pressure may ease next month. The strategy team said that as the market questions the timing and scale of AI-related revenue, chipmakers and other capital expenditure beneficiaries have become the epicenter of funding worries. Fresh doubts have surfaced over the cost of capital for some participants and whether credit markets can supply enough funding for that spending, with government outlays and non-AI capex also competing for the same capital. Such concerns are natural given future financing plans, the team said, and will linger until that financing is completed. Last week, the five-year credit default swap spread on heavily leveraged cloud newcomer CoreWeave closed above 1,100 basis points, implying roughly a 50% chance of default within five years. Wilson's team sees the semiconductor selloff entering its final stage and expects the downturn to conclude by mid-November. Technical signals and a comparison with the once-hot silver market suggest the group could still fall another 10% to 15%, with the Philadelphia Semiconductor Index potentially testing around 9,500. The Nasdaq Composite slipped 0.7% last week, extending its two-week loss to more than 5%. On Monday, Anthropic's public filing of its IPO prospectus lifted AI names, chip stocks led the advance, and the Nasdaq Composite rose 0.82% to 26,169.38.