Lisa Shalett, Chief Investment Officer at Morgan Stanley Wealth Management, stated that management turmoil at NVIDIA (NVDA.US) and Democratic midterm election victories have further intensified market concerns about the artificial intelligence (AI) trade, but these factors will not shake the core driver of this bull market — capital expenditure on AI infrastructure.
She believes the election results should not be viewed as a rejection of AI investment or data center construction. The core demands of voters are strengthening AI safety regulation and making the cost and benefit distribution of data center construction fairer.
In an interview, Shalett noted that investors are overly focused on political developments and tech stock volatility, while overlooking the market's long-term main thesis. "Long-term investors need to firmly grasp the big picture: the underlying logic of the bull market driven by AI capital expenditure and AI industry transformation remains solid. In my view, the broader narrative is extremely bullish," she said.
AI concept stocks had propelled the broader market higher for most of this year, but have recently experienced sharp swings. The Philadelphia Semiconductor Index fell 3.4% on Friday, though it still gained 8.1% for the full week despite the Nvidia-related negative news. NVIDIA (NVDA.US) shares plunged 13% this week after CEO Jensen Huang became embroiled in a scandal and announced his resignation.
Shalett pointed out that suppliers providing equipment and supporting infrastructure for AI expansion hold large backlogs, with order cycles extending to 2027 and some even stretching into the first half of 2028. Even if subsequent policies significantly delay project implementation, the substantive impact would likely not materialize until 2028 or 2029.
She further argued that even if regulatory pressure slows industry expansion and compresses long-term profit margins, it could also reduce the risk of boom-and-bust cycles and bubble bursts. A more measured pace of AI investment would help ease inflationary pressures, reduce the burden on credit markets, and decrease the amount of new equity financing the market needs to absorb.
Shalett said such changes would not destroy the bull market but could actually extend its duration. Within the technology sector, Shalett maintains a selective approach, favoring hyperscale cloud service providers and certain software companies.
Beyond that, she is also bullish on opportunities in grid infrastructure, industrials, financial services, and healthcare. For overseas equities including emerging markets, Shalett also holds a positive view, treating them as portfolio diversification tools rather than substitutes for US stocks.
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