Wall Street brokerages back AI stocks after selloff, play down U.S. regulation risk

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Wall Street backs AI stocks

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Highlights

Morgan Stanley, UBS, HSBC, and Jefferies view last week's AI stock selloff as excessive, citing unlikely severe U.S. regulation and strengthening capex cycle fundamentals.
HSBC increases technology equity exposure in the U.S. and Asia, highlighting Anthropic's IPO as a key near-term catalyst for the AI trade.
Nvidia will report quarterly earnings after November 17 with expected data center revenue growth over 12%, viewed as a major test for continued AI investment sentiment.

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Brokerage calls focus on earnings and IPO catalysts

As reported by Reuters, Wall Street brokerages including Morgan Stanley, UBS, HSBC and Jefferies say last week's selloff in the AI trade looks excessive, with fears of severe regulation under a Democrat-controlled Congress unlikely to fully materialize.

Morgan Stanley says the main effect would more likely be a delay of some projects from 2028 to 2029 rather than a derailment of the broader capital expenditure story. Its analysts say a longer AI capex cycle could help smooth supply and demand across the data center supply chain, improve credit conditions and support higher lease rates for compute.

The brokerage says it continues to favor AI hyperscalers such as Amazon.com, Meta Platforms and Alphabet. It also points to opportunities in chipmakers Nvidia and Broadcom, storage companies Seagate and Western Digital, and optical networking groups Coherent and Lumentum.

HSBC says it is using last week's correction to raise its exposure to equities again, with a tilt toward technology shares in the U.S. and Asia. The bank views Anthropic's IPO as the main catalyst for the AI trade in the coming weeks.

Market impact and positioning after the rout

Nvidia is due to report quarterly earnings after markets close on November 17 and is expected to post more than 12% quarterly growth in data center revenue. That release is seen as a key test for whether investor confidence in AI spending trends remains intact after the recent market shock.

Jefferies analyst Jane Gibbons describes the November 5 drop as reactionary rather than a fundamental reset, while UBS analysts say markets have become too negative on political risk, credit risk and AI spending. Gibbons adds that historically, daily S&P 500 declines of more than 4% have often been followed by strong forward returns, with the index averaging an 11.9% gain over six months and more than 20% over 12 months.

For the broader technology sector, the commentary suggests investors remain focused on the timing of AI infrastructure spending rather than on a collapse in demand. That stance supports expectations that market leadership in semiconductors, cloud platforms and data center supply chains can persist if earnings and new listings reinforce the sector's growth outlook.

Our earlier coverage of the S&P 500’s push toward 8,000 explained how an AI-driven rally was running into a tougher test from higher oil prices, elevated Treasury yields, and uncertainty ahead of the U.S. midterm elections. The piece also highlighted concentration and market-breadth concerns, with performance hinging heavily on a small group of megacap tech leaders and upcoming earnings delivering results strong enough to justify valuations.

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