Buy the dip on Europe's AI winners, says MS
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BUY THE DIP ON EUROPE'S AI WINNERS, SAYS MS
AI beneficiaries were the first to feel the pain in the recent market sell-off, but Morgan Stanley equity analysts expect them to be the first to recover.
"The recent share price weakness of the main AI plays, in particular among global semiconductors and the Mag-7 in the US, has triggered debate around whether the AI/tech trade is past its peak," they wrote in a Thursday note.
But when the MS team compares the current environment to a similar "growth scare" scenario in the mid-90s, and considers the fundamentals, they arrive at the conclusion that European semiconductors and other AI winners are experiencing a tactical correction and should make new highs in the coming months.
For that reason they stay overweight on semis and software.
MS's list of fifteen winning stocks spans five categories; semiconductor equipment, European data centre plays, information services/proprietary data stocks, software vendors and healthcare names with notable AI exposure.
They are BE Semiconductor BESI.AS, ASML ASML.AS, ASM International ASMI.AS, RELX REL.L, Wolters Kluwer WLSNc.AS, Experian EXPN.L, London Stock Exchange LSEG.L, Legrand LEGD.PA, SEGRO SGRO.L, Schneider Electric SCHN.PA, Fortum Oyj FORTUM.HE, SAP SAPG.DE, Sage SGE.L, Siemens Healthineers SHLG.DE and Merck KGaA MRCG.DE.
According to LSEG Workspace, these 15 stocks are down on average about 7.5% in the last four weeks. The likes of ASML ASML.AS and BE Semiconductor BESI.AS stand out, being down a respective 22.9% and 34% since July 11.
(Lucy Raitano)
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