Morgan Stanley said in a new industry report that total capital expenditure by the world’s 14 largest listed cloud service providers is expected to reach nearly $1.6 trillion next year. The spending pool is still growing, but the growth rate is set to slow sharply. In the same report, the bank said the artificial intelligence semiconductor market remains on a high-growth track, and named Taiwan Semiconductor Manufacturing Co. (TSMC), MediaTek, King Yuan Electronics and WinWay among 23 Taiwan-listed stocks it views favorably.
Cloud capex is still rising, but growth is slowing
According to the Morgan Stanley report, total capital spending by the 14 largest listed cloud service providers worldwide is projected to approach $1.6 trillion next year. Even with that increase in absolute dollars, the annual growth rate is expected to drop from 99% in 2026 to 60% in 2027.
The report summary also said growth in cloud service provider capital expenditure is expected to slow to 12% in 2028.
AI semiconductor demand remains strong
Morgan Stanley drew a contrast between moderating cloud capex growth and the faster expansion in AI semiconductors. It projected that the sector’s total addressable market will post a 30% compound annual growth rate from 2023 to 2030. By 2030, the market is expected to reach $753 billion, equal to half of the global semiconductor market.
Under a bullish scenario, the semiconductor market could climb to $485 billion this year.
The report said demand tied to NVIDIA growth and ASIC development supports the outlook for 23 Taiwan-listed names, including TSMC, MediaTek, King Yuan Electronics and WinWay. It added that Taiwanese companies in foundry, IC design and packaging and testing are positioned to add business momentum to the semiconductor industry.
HBM supply tightness is expected to persist
On the memory side, the report said DRAM capacity continues to lag. Even after factoring in capacity from ChangXin Memory Technologies, the global high-bandwidth memory, or HBM, market is still projected to show supply-demand gaps of -17% in 2026 and -15% in 2027.
Morgan Stanley also warned that IC design companies may face margin pressure from rising costs, while non-AI segments could be squeezed.
Key points from the report
- Total capex by the world’s 14 largest listed cloud service providers is projected to approach $1.6 trillion next year.
- Annual capex growth is expected to slow from 99% in 2026 to 60% in 2027, and then to 12% in 2028.
- The AI semiconductor market’s total addressable market is forecast to grow at a 30% CAGR from 2023 to 2030.
- The market is expected to reach $753 billion by 2030, accounting for half of the global semiconductor market.
- In a bullish case, the semiconductor market could reach $485 billion this year.
- The report highlighted 23 Taiwan-listed stocks, including TSMC, MediaTek, King Yuan Electronics and WinWay.
- HBM supply-demand gaps are projected at -17% in 2026 and -15% in 2027.