Morgan Stanley: SPE Sector Stagnates as Market Demands AI Capital Return Certainty

Morgan Stanley's September 7 report on the Semiconductor Capital Equipment (SPE) sector notes that despite upward revisions in WFE forecasts, investors are no longer satisfied with simple capacity expansion narratives. The market is demanding clearer evidence of AI capital returns. Morgan Stanley maintains a 'neutral' rating on the sector, recommending stocks like AEIS, MKS, and ONTO. While WFE forecasts for 2026 and 2027 have been raised, the firm notes limited upside as market expectations for 2027 WFE are already high.