Is the chip cycle accelerating faster than expected?

Investing.com -- The semiconductor upcycle is gaining momentum beyond the data center, with Morgan Stanley's latest distributor survey said to be pointing to a broad-based acceleration that could drive stronger-than-expected earnings across the industry.

Analyst Joseph Moore told clients in a note on Wednesday that while positive indicators were beginning to align last quarter, first-quarter 2026 results show "a clearer turn in the upcycle, matching recent anecdotes."

The firm's AlphaWise analysis suggests shipments have largely normalized to end demand and should accelerate from here, with the distributor survey pointing to strong, above-seasonal sequential growth in the second quarter.

Morgan Stanley identifies three pillars supporting the setup, with broad-based strength, inventory replenishment and tighter supply across the supply chain.

The firm notes that analog and MCU segments are benefiting from tightening trailing-edge capacity, geopolitical volatility and severe input cost inflation in memory.

"We've gone from supply abundance to shortage concerns within months," Moore writes, though Morgan Stanley stops short of calling for a full-blown shortage cycle.

Outside the data center, Morgan Stanley's checks are strongest for industrial names, flagging Analog Devices and Microchip Technology, as well as power semiconductors, where ON Semiconductor and Texas Instruments stand out.

Auto semiconductors could deliver the biggest upside surprise, the firm says, with conditions proving "better-than-feared" despite cautious expectations.

On specific names, Morgan Stanley says potential modest upside from NXP should serve as a positive catalyst following a string of recent sector downgrades, and expresses a constructive view on Allegro MicroSystems.

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