Cloud Semis: Peak Growth, Less Upside

Morgan Stanley turns cautious on cloud semis as the US team expects about 20% of 2028 US data center capacity additions, roughly 5GW including some projects in Texas and Ohio, could shift to 2029. That implies US data center GW additions decline 4% Y/Y in 2028 before rising 38% Y/Y in 2029, while global additions grow 9% and 20% in 2028 and 2029. This could create an air pocket across the tech supply chain in 2028, potentially reducing pricing power and leading to an inventory build. Hyperscaler capex forecasts are maintained at USD1.6trn and USD1.8trn for 2027 and 2028, as hyperscalers are expected to spend and build as much capacity as they can while shifting build locations to more data center friendly states. After the US midterms, the team is mindful of delays in project approvals and initiation plus labor and material constraints. Revision breadth is peaking and Asia supply-chain visibility on 2027/28 general-server production is weakening, so Montage Technology (6809.HK, 688008.