Morgan Stanley shares 12 AI bottleneck stocks with at least 40% upside as Big Tech capex continues to boom
The AI picks and shovels trade is still hot, Morgan Stanley says.
While it’s a good time to start buying AI adopters and software stocks to prepare for the next wave of AI gains, the bank told clients in a September 24 note to stick with stocks at the heart of the data center energy bottleneck as well.
“We believe demand for compute is likely to significantly exceed supply for years to come,” a team of analysts led by Stephen Byrd wrote in a note.
Morgan Stanley sees a few factors slowing the buildout, including limited power supply, a tight supply of laborers able to construct data centers, and regulatory barriers.
Historically, during technology development cycles, the infrastructure trade starts to underperform once the focus shifts to companies benefiting from its adoption. But constraints around the buildout and the ongoing strength in demand will continue to propel the trade this time around, the bank said.
“We don’t expect the same linear handoff in market leadership seen in prior computing cycles. Instead, we are calling for a ‘barbell’ of outperformance over the next 6-12 months” between adopters and the AI picks and shovels, the bank said.
To ride the upside, Morgan Stanley listed out the AI power bottleneck stocks that its analysts rate “Overweight,” similar to “Buy.”
We’ve listed below the 12 US stocks on the list that have at least 40% upside to their Morgan Stanley price targets.