Chip Stocks In Focus After Bearish Morgan Stanley Note

Morgan Stanley said the bottom still isn't in sight for the chip sector

As Wall Street digests a post-earnings slide from Micron Technology (MU), other chip stocks are in focus, as well. This follows a note out of Morgan Stanley that urged investors to "stay cautious" on the semiconductor industry, with the firm calling out weakness from almost all key markets, on top of valuations it still sees as too high.

Looking at the specific names from the analyst note, Morgan Stanley said it was siding with Intel Corporation (NASDAQ:INTC) in the closely watched battle with rival Advanced Micro Devices, Inc. (NASDAQ:AMD). At the same time, the firm called attention to AMD's computer processor product pipeline, and said a slowdown in the data center business could be a risk for INTC in 2019.

On the charts, Intel stock is trading down 0.4% today at $47.47, remaining in the tight sideways pattern that's been in place since the end of October. As for AMD, the shares are 1.5% lower at $19.20, still holding atop a trendline connecting higher lows the past two months. A quick bounce could be in store for AMD, too, considering it's one of the best stocks to own after a Fed rate hike.

Another name mentioned in the note was Nvidia Corporation (NASDAQ:NVDA). Despite the stock's recent struggles, Morgan Stanley put an "overweight" rating on the equity. NVDA shares were last seen trading 0.5% lower at $146.36.

Traders recently have been showing bearish tendencies toward NVDA. For instance, data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows higher-than-normal put buying relative to call buying during the past two weeks, and short interest on Nvidia rose by 18.3% in the last reporting period.