Investors love to find secular trends. After all, who doesn’t want to find a trend that they can ride for a decade or more? One trend that investors had ridden for years was the explosion of demand for lithium and related minerals. All the demand for electric and hybrid cars, smartphones, alternative and renewable energy systems all has to add up to something big. And now throw in the variable that demand might outstrip available and economically viable supplies in the years ahead.

But what if the big lithium boom was greatly exaggerated? It seems hard to imagine that these trends away from combustion engines are going to dwindle. Ditto for smartphones and other uses in alternative energy and in multiple technology applications. According to Morgan Stanley, lithium may be in for a serious reality check.

This call is going to feel very controversial because most investors have believed that lithium prices and lithium demand would remain quite strong for years — maybe even for more than the next generation. Is it possible that the great lithium boom has already come to an end?

Morgan Staley believes that the growth of electric vehicles will be insufficient to offset a rising supply of lithium from Chile. The firm sees an extra 500,000 tonnes being added to the global supplies by 2025, and it forecast that lithium prices will drop up to 45% by 2021, from over $13,000 per tonne to about $7,330. In short, additional supply will swamp the forecast demand ahead.

Morgan Stanley issued two key downgrades on Monday, with the fallout spreading to anything and everything tied to lithium. None of this is being viewed as welcome in the lithium and related companies that have public stocks. After all, lithium prices had more than doubled over the past couple of years. And now Morgan Stanley sees 2018 as the last year that the supply-demand equation will be in deficit, with a significant surplus starting next year.

Morgan Stanley downgraded Sociedad Química y Minera de Chile S.A. (NYSE: SQM), or Chilean Chemicals and Minerals, to Underweight from Equal Weight. The new price target is $44. The stock was last seen down 9% at $53.13 per American depositary share (ADS), in a 52-week range of $30.82 to $64.20.

Albermarle Corp. (NYSE: ALB) was also seen down almost 9% at $10.20 on Monday, and Morgan Stanley downgraded it to Underweight from Equal Weight with an $85 price target. The shares have a 52-week trading range of $92.22 to $144.99.

What’s interesting about this call is that many analysts had been forced to stop chasing these shares higher and higher in late 2017 and early 2018. The prices had become quite high. And now the lithium segment as a whole is seeing fallout in the companies that win from higher lithium price and higher lithium demand from this call, even though the weakness already had been seen ahead.

The Global X Lithium & Battery Tech ETF (NYSE: LIT) was last seen down 4.25% at $35.65, in a 52-week range of $25.81 to $41.21. The exchange traded fund component companies were also down handily on Monday.

FMC Corp. (NYSE: FMC) was last seen down 2.5% at $83.55 on Monday. The 52-week range is $57.29 to $98.70.

Another company, called Lithium Americas Corp. (NYSE: LAC) is a Vancouver-based lithium explorer with interests in Argentina and Nevada, and its shares were last seen down 7.4% at $6.62 on Monday. The 52-week range is $3.10 to $10.95.

For whatever it’s worth, Tesla Inc. (NASDAQ: TSLA) is one of the world’s top lithium users. Tesla shares were up 1.3% at $356.70 in midday Monday trading, in a 52-week range of $242.01 to $389.61. Will cheaper lithium perhaps add to Tesla’s longer-term profitability and margin prospects?

It also may be worth noting that other analysts may not be anywhere as negative as this Morgan Stanley call. Argus reiterated Albemarle as Buy with a $148 price target (versus a $113.68 close) at last Friday. The independent research firm noted a strong outlook for the major lithium producer. On January 30, UBS raised Albermarle to Buy from Neutral with a $150 price target versus a prior close of $111.68.

Stay tuned. This trend of being too hot to handle versus a difference in forecasts for lithium already has turned these into major battleground stocks.

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