The chief stock-market strategist for Morgan Stanley is sticking with a forecast that the S&P 500 will end the year at 8,000, but growing caution is on display as he identified that support for the key semiconductor sector could come considerably lower.

Strategists led by Mike Wilson say semiconductors and other capital expenditure beneficiaries are the “epicenter” of funding concerns as doubts creep on the timing and size of the revenue opportunity from artificial intelligence.

“There are new questions about the cost of capital for certain players in the space and even the availability of capital in credit markets to fund the spending, given all of the demands from governments and non-AI-related capex,” said the Morgan Stanley team.

With possibly more fund raising on tap, “focus on that supply is normal but will linger until it’s completed.”

It comes as the five-year credit-default swaps for CoreWeave, an indebted neocloud provider, ended last week over 1,100, implying roughly a 50% chance of a debt default within five years.

The good news, according to Wilson and team, is that semiconductors are in their “final stages” of the correction which they say should end in mid-November. The bad news is that, based on their technical analysis as well as a comparison to the once-hot silver market, that correction could be another 10% to 15% lower than current levels, with the PHLX semiconductor index around 9,500, after closing Friday at 10,779.

Last week, the tech-heavy Nasdaq Composite finished 0.7% lower, and it’s down more than 5% over the last two weeks.

Ahead of this week’s Federal Open Market Committee decision, the strategists said the Fed has been comfortable with the tightening in financial markets that has hit both the stock and bond markets.

“Financial conditions have tightened substantially, and [Chairman Kevin] Warsh seems to be ok with that, including the damage it is causing within both the stock and credit markets. Our quality call was fundamentally driven but has been exacerbated by tighter liquidity provisions at a time when the demands for liquidity have been rising,” the team said.