AI Stocks Rebound as Morgan Stanley and UBS Call the Selloff Overdone

AI stocks rebound sharply on Monday, November 9, after Morgan Stanley, UBS and other Wall Street brokerages called last week's AI selloff overdone. The S&P 500 rose about 2.4% and the Philadelphia semiconductor index more than 6%, Reuters reported, led by AMD and Broadcom. Nvidia fell about 4% to 6% as its board investigates CEO Jensen Huang, so the rally came without the market's biggest AI name.

The bounce matters because last week's drop was about the future of AI spending, not one company. After Democrats won Congress and key governor races, investors priced in tougher rules for data center construction. The brokerages argue those rules will push some projects back by about a year rather than cancel them. Monday's trading suggests many investors agreed, at least for a day.

+2.4%

S&P 500 on Monday, per Reuters

+6%+

Philadelphia semiconductor index, per Reuters

+13%

AMD, the biggest chip gainer, per Reuters

5 GW

US data center capacity Morgan Stanley sees slipping from 2028 to 2029

How big the AI stocks rebound was

Reuters reported that the Dow rose about 2.2%, the S&P 500 about 2.4% and the Nasdaq Composite about 2.7%, with all 11 S&P 500 sectors higher. Yahoo Finance put the gains at 2.2%, 2.3% and about 2.7%. The S&P 500 was bouncing off its biggest weekly drop since April 2025, and the chip index had fallen more than 12% last week, its worst week since April 2025, according to Reuters.

Chipmakers did most of the work. AMD surged about 13% and Broadcom rose nearly 9%, Reuters said. Yahoo Finance reported that AMD's jump followed an upgrade to Buy from Oppenheimer. AI cloud stocks also recovered: in afternoon trading Cloudflare was up 11%, Nebius 9% and CoreWeave 6%, the last after a cloud deal with UK self-driving startup Wayve, according to 24/7 Wall St. A sharp fall in oil prices, after President Trump played down the chance of new strikes on Iran, helped the whole market.

Morgan Stanley: delay, not derailment

Morgan Stanley's note, titled "Buy the Drop: AI Investment Opportunities Post the US Midterms," argues the market overreacted to the election. Reuters reported that the bank sees the main effect as a push-out of some projects from 2028 to 2029, and that a longer capex cycle could even bring positives such as a better credit outlook and higher lease rates for compute.

According to investingLive, which reviewed the note, Morgan Stanley expects about 20% of US data center projects planned for 2028 to slip into 2029, or about 5 gigawatts of capacity. It now sees US data center capacity additions falling 4% in 2028 before jumping 38% in 2029, while global additions grow 9% and 20%. It kept its hyperscaler capex forecasts of $1.6 trillion for 2027 and $1.8 trillion for 2028 unchanged, flagging some downside risk to 2028, investingLive said. The concern centers on Texas and Ohio, where newly elected governors could add requirements, and projects already under construction are not expected to be disrupted.

The note is not a blanket call. Reuters said Morgan Stanley stayed positive on Amazon, Meta and Alphabet and saw opportunities in Nvidia, Broadcom, Seagate, Western Digital, Coherent and Lumentum. investingLive added two warnings from the same note: suppliers could face a traditional downcycle in 2028, and new data center developers and neoclouds face more scrutiny from lenders even as AI-related debt issuance rises in 2027.

UBS, HSBC and Jefferies make the same case

UBS said markets had become too negative on AI political risk, AI credit risk and AI spending, Reuters reported. HSBC said it was using the correction to raise its equity exposure again, leaning into tech in the US and Asia, and named Anthropic's IPO as the main catalyst in the coming weeks. Jefferies equity analyst Jane Gibbons described the November 5 selloff as reactionary rather than a fundamental reset, and noted that daily S&P 500 declines of more than 4% have historically been followed by strong forward returns.

Not everyone was convinced. Daniela Hathorn, senior market analyst at Capital.com, said in comments carried by TheStreet on Yahoo Finance that the rebound did not settle the questions behind last week's fall.

Rates are another open issue. Reuters noted that fears of a December Fed rate hike persisted after strong October jobs data, a risk we covered in Fed rate hike odds after the jobs report.

Why Nvidia missed the rally

Nvidia was the only decliner in the chip index on Monday, Reuters said, hitting its lowest intraday level since March 31. Its board is investigating whether Huang was targeted by a foreign intelligence effort, and it has said it has no reason to believe company secrets were compromised. Our earlier report, Nvidia stock falls nearly 5% as Citi cuts US stocks to Neutral, covers the probe and Citi's downgrade. The split matters: the brokerages' bull case still leans on Nvidia's earnings on November 17, when Reuters said analysts expect data center revenue to rise more than 12% from the previous quarter.

What the AI Bubble Index says

The AI Bubble Index read 63.9 after Friday's close, in its Normal band, up from 62.9 a week earlier. It does not yet include Monday's rebound. Sentiment and attention remains the hottest family at 92.5 and the demand gap the coolest at 40.1, while Fragility at 69.8 sits slightly above Euphoria at 66.5. One strong session after a sharp weekly drop is the kind of swing the momentum family absorbs over weeks, so a single day will not move the reading much. The dashboard shows every component.

Sharp rebounds inside a falling market are common in both healthy corrections and bursting bubbles, which is why one day settles little. Our guide on how to detect market bubbles explains which signals separate the two, and Is the AI bubble bursting? compares last week's chip drawdown with the spending data. For the political risk behind the selloff, see our report on the data center moratorium risk.