Morgan Stanley has framed the latest AI equity trade as a rotation away from chipmaker leadership and towards hyperscalers, while IDC's semiconductor forecast keeps the hardware buildout central to the story.

The Economy Middle East article cited IDC's projection that semiconductor revenue will reach $1.29 trillion in 2026, a 52.8 percent increase from 2025, after passing the $1 trillion threshold.

It said Morgan Stanley sees investors looking for clearer evidence that AI applications can justify spending by Alphabet, Amazon and Meta Platforms.

IDC Forecasts Semiconductor Revenue At $1.29 Trillion In 2026

IDC's forecast, as cited by Economy Middle East, keeps AI infrastructure demand at the centre of semiconductor growth even as the article describes a stock-market rotation.

The article attributed the growth to artificial intelligence infrastructure investment.

It did not separate chip revenue by accelerator, memory, networking or foundry category, and it did not give regional revenue shares for the Middle East or Gulf markets.

Morgan Stanley Describes A Shift Towards Hyperscalers

Economy Middle East said Morgan Stanley's analysis points to investors re-evaluating the AI cycle after a long period of semiconductor-stock dominance.

The article said the brokerage sees capital broadening towards large technology companies building the data centre infrastructure needed for AI development.

The report named Alphabet, Amazon and Meta Platforms as examples of companies whose capital expenditure is being watched for evidence that AI applications can generate returns.

It also said hyperscalers have underperformed for a period, leaving strategists to view them as offering optionality while investors reduce exposure to chip-sector volatility.

Rate And Energy Assumptions Shape The Rotation

The article said Morgan Stanley linked the rotation to expectations for fewer U.S. Federal Reserve interest-rate increases and declining crude oil prices.

It said those macro assumptions could support sectors sensitive to consumer spending and economic growth.

Morgan Stanley also cited consumer discretionary firms, transportation companies and biotechnology stocks as possible beneficiaries of changing market leadership, according to the article.

Those claims remain brokerage analysis rather than disclosed company guidance from the named hyperscalers or chipmakers.

Philadelphia Semiconductor Index Decline Marks The Choppy Phase

Economy Middle East said Morgan Stanley warned that movement away from the chip trade could make equity markets less predictable in the near term.

The article pointed to divergence between a decline in the Philadelphia Semiconductor Index and recovery in broader technology proxies such as the Roundhill Magnificent Seven ETF.

The article did not disclose Morgan Stanley's exact index levels, portfolio weights, hyperscaler capex assumptions, revenue forecasts for AI software, or customer-level evidence that AI applications are already producing returns sufficient to cover infrastructure spending.