Morgan Stanley Identifies Three Stock Groups for Buying on the Dip
Morgan Stanley considers the post-election sell-off in AI stocks excessive and recommends selectively purchasing undervalued shares. The bank has divided its ideas into three groups.
In a client note, analyst Stephen Byrd called the market's reaction to the Democratic victory excessive. According to the bank's assessment, a potential slowdown in data center construction could extend the AI spending cycle and smooth out supply chain disruptions.
The first group includes large technology companies with access to capital: Microsoft, Amazon, Meta, Alphabet, and SpaceX. The bank believes such players are better prepared for constraints on AI infrastructure growth.
The second group is linked to data centers and the supply chain. Morgan Stanley suggested selecting companies with high current profitability and low valuations relative to past levels. Among data center shell suppliers, the bank listed Terawulf, Riot Platforms, Hut 8, and Applied Digital—these, according to the bank, are less exposed to regulatory risks in Texas. In energy generation, the focus is on Bloom Energy, Solaris Energy, Liberty Energy, Vistra, Talen Energy, Constellation Energy, and BorgWarner. In energy infrastructure, the picks include Williams Companies, Clearway Energy, HA Sustainable Infrastructure, Ormat Technologies, and Fervo Energy. In the chips and equipment segment, the list features Nvidia, Broadcom, Taiwan Semiconductor, Seagate Technology, Western Digital, Lumentum, Coherent, Arista Networks, and Keysight Technologies.
The third group comprises software providers and companies implementing AI. The bank's list includes Snowflake, Datadog, ServiceNow, Cloudflare, and Palantir, as well as Devon Energy, Grindr, GXO Logistics, Citigroup, Blackstone, and Citizens Financial Group. Morgan Stanley analysts rate these stocks as Overweight, with potential upside to the bank's target prices ranging from 38% to 74.4%.
