NEW YORK, Nov. 3, 2009 (Xinhua News Agency) -- Morgan Stanley (NYSE:MS) cut its rating on the semiconductor industry to cautious from attractive on Tuesday, warning the risk of an inventory buildup and growth peak.

In a note to clients, the investment bank said the pace in the recovery in expectations for the group has been unprecedented and suggests selling the sector's stocks on their rallies.

The firm warned that fundamentals are peaking, inventories are "creeping up," and year-on-year growth will peak in the first quarter of 2010.

Analyst Mark Lipacis downgraded chip giant Intel Corp. (NASDAQ:INTC) to " equal weight" from "overweight," saying "expectations for 2010 have risk." Among others, Micron Technology Inc. (NYSE:MU) , Altera Corp. (NASDAQ:ALTR) , and Xilinx Inc. (NASDAQ:XLNX) (XLNX) were also lowered to "equal weight", while ArvinMeritor Inc. (NYSE:ARM) , Nvidia Corp. (NASDAQ:NVDA) and ON Semiconductor Corp. (NASDAQ:ONNN) were downgraded from "equal weight" to "underweight."

The downgraded stocks fell in Tuesday trading. Intel shares sank 51 cents, or 2.68 percent, to 18.5 U.S. dollars as Tuesday's closing.