Morgan Stanley picks 24 AI infrastructure stocks built to weather spending slowdown
Investors have been mulling what a decline in capex spending could mean for the AI trade / Photo: Robert Way / Shutterstock
Wall Street professionals are advising investors to be more selective about stocks around the AI infrastructure buildout as doubts grow about how long the capital spending boom can last, Business Insider reports.
Morgan Stanley expects spending growth among the cloud giants to slow: after roughly doubling this year, capex is projected to rise just 60% next year and only 14% in 2028. But the slowdown will affect AI companies differently, its analysts argue. The bank has compiled a list of companies positioned to weather it better than others: they either have strong pricing power thanks to supply chain bottlenecks or opportunities to gain market share.
Morgan Stanley picks
Nvidia, an AI chip designer (almost 96% of Wall Street analyst ratings are “buy”)
Dell Technologies, a server and PC maker (67%)
Advanced Micro Devices, a chipmaker (79%)
Broadcom, a semiconductor and infrastructure software developer (94.5%)
Micron Technology, a memory chipmaker (93%)
SanDisk, a flash memory and storage device maker (82%)
Seagate Technology, a data storage device and hard-drive maker (83%)
Western Digital, a data storage systems maker (72.4%)
Hewlett Packard Enterprise, an enterprise IT solutions and hardware provider (58%)
Samsung Electronics, a tech giant that makes memory chips for electronics and AI (97%)
SK Hynix, a semiconductor and memory chipmaker (97%)
Vertiv Holdings, a data center infrastructure provider (83%)
Caterpillar, a heavy machinery and equipment maker (56%)
Cummins, an engine and power systems maker (65%)
ERock, a provider of on-site power generation systems (47.6%)
Forgent Power Solutions, a power solutions provider (71%)
GE Vernova, a power equipment maker (75%)
Innio, a gas engine and power plant manufacturer (80%)
Bloom Energy, a solid oxide fuel cell manufacturer (54.3%)
Everpure, a data storage systems provider (86%)
Lumentum, an optical component and laser manufacturer (85%)
Trane Technologies, a heating, ventilation, air conditioning, and thermal management equipment maker (64%)
Johnson Controls International, a building controls and industrial automation systems maker (54%)
Hubbell, an electrical equipment and component maker (50%)
AI boom may prove more resilient than expected
Morgan Stanley sees the possibility that capex growth will slow less sharply than investors fear. It pointed out that Wall Street has consistently underestimated the scale of computing infrastructure investment cycles, including the internet buildout leading up to 2000 and the cloud buildout leading up to 2020.
The bank also emphasized the importance of supply chain bottlenecks: higher-than-expected capex could boost earnings for beneficiaries of the AI boom. “An acceleration in hyperscaler and neocloud capex from current levels, or a shift in priorities among incumbent players, could put acute pressure on specific pockets of the supply chain,” Morgan Stanley wrote.
