Morgan Stanley has identified 12 stocks with growth potential of 40% or more amid an AI computing capacity shortage

Morgan Stanley has identified stocks of companies that could profit from power shortages affecting data centers, according to Business Insider (BI). According to the bank’s assessment, demand for computing power will continue to outstrip supply for many years to come, so there is just as much potential to profit from providers of artificial intelligence infrastructure as from companies implementing AI itself.

Morgan Stanley advised clients to continue betting on companies that help overcome energy constraints in data center construction. From the bank’s selection, BI highlighted 12 U.S. stocks with growth potential of at least 40% (based on the target price). All of them have received an “Overweight” recommendation from Morgan Stanley analysts—the equivalent of a “buy” recommendation, the publication explains.

Morgan Stanley noted that the construction of data centers is being hampered by a shortage of electricity and workers with the necessary skills, as well as regulatory barriers. “We believe that demand for computing power is likely to significantly exceed supply for many years to come,” BI quotes a note from the bank’s team of analysts led by Stephen Bird.

In previous technology cycles, leadership in the stock market shifted from companies building infrastructure for a new technology to businesses that profit from its adoption. “We do not expect the same sequential shift in market leadership as in previous cycles of computing technology development,” according to a Morgan Stanley note. According to the bank’s forecast, both groups—infrastructure providers and companies implementing AI—will be able to outperform the market over the next six months to a year.

The stocks with the greatest growth potential relative to Morgan Stanley’s target prices are TeraWulf (260.6%), Cipher Digital (182.9%), and Hut 8 (156.1%). These companies have evolved from Bitcoin mining and are restructuring their businesses to focus on data centers for AI. According to Morgan Stanley’s estimates, INNIO Group shares could rise by 140.9%, Clearway by 89.2%, ERock by 79.3%, Riot Platforms by 72.5%, and Liberty Energy by 66.3%. Rounding out the list are Williams Companies with 45.1% growth potential, Cummins with 44.6%, GE Vernova with 42.1%, and NextEra Energy with 40%.

Wall Street views the entire portfolio positively: the consensus recommendation for each of the 12 stocks is “Buy” or “Overweight,” according to FactSet data cited by The Wall Street Journal. For ten of the stocks, the consensus has remained unchanged over the past three months. For ERock and INNIO, which went public just this past June, Wall Street’s current recommendations are “Buy” and “Overweight,” respectively.

A comparison with FactSet data shows that Morgan Stanley analysts are more optimistic than most of their peers: for nine stocks, their price targets are significantly higher than the averages, and for five of them—Williams, INNIO, Clearway, Hut 8, and TeraWulf—match the highest on the market. The bank’s assessment diverges most significantly from the market’s for TeraWulf, Cipher Digital, and Hut 8: its targets for these stocks are 84%, 77%, and 73% above the consensus, respectively. Morgan Stanley’s forecasts for Cummins, Liberty Energy, and ERock are virtually identical to the consensus.

This article was AI-translated and verified by a human editor