Feb 27 (Reuters) - Morgan Stanley raised its year-end target for the MSCI's European index on Tuesday, citing a boost from artificial intelligence (AI), a pick up in deals and hopes of a "soft landing" of the U.S. economy.

The Wall-Street brokerage, which began the year with a 'bullish' view on broader European stocks, revised its index target to 2,230 from its prior estimate of 2,115.

"Evidence of the post-Fed pivot soft landing playbook has strengthened. As a result, we have an increasing conviction in a market re-rating more in line with historical soft landing periods," Morgan Stanley strategists said in a note.

Traders are betting on a 63% probability of the U.S. Federal Reserve starting an interest rate cut in June, according to the CME FedWatch tool.

Despite the latest data showing a sustained cooling in consumer prices, the European Central Bank (ECB) has adopted a cautious approach towards rate cuts, given rapid wage growth and abundant underlying price pressures.

Investor bets for a 'soft landing' of the U.S. economy have been steadily rising, led by the narrative around rate cuts and falling consumer prices, while the boom in AI benefited companies across both the U.S. and Europe.

Against this backdrop, the brokerage also revised its recommendations for a string of European sub-sectors.

Morgan Stanley upgraded the semiconductors sector to "overweight" from "equalweight."

"Surge in AI activity and the growing design complexity it brings is involving not only more capacity build than expected, but a move into advanced (semiconductor) equipment supply," the brokerage added.

It also upgraded travel and leisure sector to "overweight" from "equalweight" on benefits from positive free cash flow and strong earnings outlook.

Morgan Stanley also downgraded the household and personal care sector to "underweight" from "equalweight" due to concerns over declining volumes and a squeeze in margins. (Reporting by Siddarth S and Kanchana Chakravarty in Bengaluru; Editing by Dhanya Ann Thoppil)