Why Morgan Stanley Downgraded PDD Holdings (PDD) Farooq Tue, November 10, 2026 at 5:33 PM EST 4 min read ^IXIC -0.74% ^GSPC -0.38% PDD -1.35% Trade PDD on Coinbase Trading disclosure Trading disclosure The above button links to Coinbase. Yahoo Finance is not a broker-dealer or investment adviser and does not offer securities or cryptocurrencies for sale or facilitate trading. Coinbase pays us for certain activity generated through this link. Prices displayed are informational.
We just published a list of the 10 Stocks Analysts Just Downgraded and PDD Holdings (NASDAQ:PDD) ranked 8th on this list.
Wall Street has had a rough start to November. The Nasdaq Composite fell 5.52% on November 5, its steepest one-day drop in 19 months, and slid into a correction, more than 10% below its October 6 record close. The semiconductor index lost more than 12% that day, and about $3 trillion in value was erased from S&P 500 companies.
Fear of tighter rules on AI drove much of the rout. Democratic wins in the November elections raised concerns that stricter regulation could slow the buildout of AI infrastructure, and the stocks tied to data centers took the hardest hit. Investors who had been paying up for AI growth suddenly had to ask how much of that growth could be stopped by politics.
Not everyone saw the drop as a verdict on the AI trade. Jed Ellerbroek of Argent Capital Management described the selling as a capitulation phase for data center beneficiaries, meaning forced selling that often marks a low. A Wall Street research shop, Yardeni, argued that political pushback on data centers amounts to "speed bumps, not roadblocks, even though Wall Street seems to be pricing in the latter."
The economy did not offer a cushion. Payrolls rose by 165,000 in October, far above the 65,000 to 70,000 economists expected, and the unemployment rate stood at 4.1%. That kept a December rate hike in play, and Cleveland Fed President Beth Hammack and Richmond Fed President Thomas Barkin have both hinted that higher rates could be on the table.
Our ranking of oversold AI stocks where Wall Street analysts see 50%+ upside looks at the corner of the market that sold off the most.
On Monday, strategists led by Beata Manthey cut US stocks and the global technology sector to neutral and raised European stocks outside the UK to overweight. Manthey warned that positioning in stocks "could reset lower into net-short territory." The S&P 500 had its biggest weekly loss since April 2025, which helps explain why many investors are looking for cheaper places to put money. You might also be interested in our list of affordable stocks Wall Street analysts like.
Stocks bounced back on Monday. By midday, the Dow was up about 2%, the S&P 500 about 2.3%, and the Nasdaq about 2.6%. Inflation data due later this week is the next big test for the market and for the Federal Reserve's rate path, and analysts have kept reshuffling their ratings as the numbers move.
PDD made it to our list because it has an average upside potential of 40%. Morgan Stanley analyst Eddy Wang cut PDD Holdings to Equal-Weight from Overweight on November 9 and lowered his price target to $90 from $129. His complaint is about cash. PDD sits on a large pile of it, yet investors have little sense of when or how much will come back to shareholders, so Morgan Stanley now applies a 70% discount to the company's net cash.
PDD runs Pinduoduo, a Chinese e-commerce platform, and its overseas marketplace Temu. The balance sheet is the bull argument: cash and short-term investments stood at RMB456.4 billion, or US$67.3 billion, at the end of the second quarter. The profit picture is where bears push back. Second-quarter revenue rose 8%, but net income fell 12%, even as transaction services revenue grew 13%. Bears say the slower profit growth suggests heavy spending to win over merchants is not yet paying off, while bulls argue that the cash gives PDD time to prove otherwise. Wang's downgrade leans toward the bears for now, since he sees limited visibility on how much of that cash will ever reach shareholders.
Whether those merchant investments pay off is the question behind our look at PDD's slowing profit growth.
While we acknowledge the risk and potential of SAP as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.
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