Don't be intimidated by the Nvidia turmoil and election noise! Morgan Stanley: AI volatility does not change the bull market's main engine, and the long-term narrative is "extremely bullish."

Morgan Stanley Wealth Management Chief Investment Officer Lisa Shalett said that management turmoil at NVIDIA Corporation (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 DRIVE of this bull marketcapital 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 of voters' demands is stronger AI safety regulation and a fairer distribution of the costs and benefits of data center construction. In an interview, Shalett noted that investors are overly focused on political developments and tech stock volatility, while neglecting the market's long-term main thesis. "Long-term investors need to hold firmly to 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 bigger-picture narrative is extremely bullish," she said. AI concept stocks drove the broader market higher for most of this year, but have recently swung sharply. The Philadelphia Semiconductor Index closed down 3.4% on Friday, though it still gained 8.1% for the full week amid the negative news related to NVIDIA Corporation. NVIDIA Corporation shares plunged 13% this week after Chief Executive Officer Jensen Huang became embroiled in a scandal and announced his resignation. Shalett pointed out that suppliers providing equipment and supporting infrastructure for AI capacity expansion hold large backlogs, with order cycles already extending to 2027 and some even into the first half of 2028. Even if policies are later introduced that significantly delay project implementation, the substantive impact will likely not appear 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-bust cycles and bubble bursts. A more moderate pace of AI investment would help ease inflationary pressure, lighten the burden on credit markets, and reduce the scale of new equity financing the market needs to absorb. Shalett said such changes would not destroy the bull market, but could instead extend its duration. Within the technology sector, Shalett maintains a selective approach, favoring hyperscale cloud service providers and some software companies. In addition, she is optimistic about opportunities in power grid infrastructure, industrials, financial services, and healthcare. Shalett is also positive on overseas equities, including emerging markets, viewing them as portfolio diversification tools rather than substitutes for U.S. stocks.