Morgan Stanley: Expectations for a New Rise in Technology Stocks!

Rising Expectations with the Relationship of Artificial Intelligence

Analysts from investment bank Morgan Stanley emphasize that the high expectations in the field of artificial intelligence (AI) could trigger a potential upward trend in US technology stocks. Recent valuation pullbacks and strong revenue expectations are increasing optimism towards the sector.

Revenue Expectations Reach New Heights

The strategy team led by Michael Wilson notes that revenue growth expectations for major technology firms have reached the highest levels in recent years. In particular, the sharp sell-offs in software stocks have created attractive buying opportunities in significant companies like Microsoft and Intuit.

Strong Dynamics in AI Infrastructure

Wilson states that short-term pullbacks are normal in large investment cycles while reporting that favorable fundamental conditions for AI infrastructure providers continue. Additionally, he points out that companies integrating AI into their business processes are still not fully priced in by the market.

Rise of Companies Focused on Capex and Integration

Last week, the Nasdaq 100 index experienced its sharpest weekly decline since December, and AI-sensitive stocks also retreated alongside renewed products. However, the Bloomberg Magnificent Seven index continues to trade at approximately a 29 forward P/E ratio, remaining below the five-year average. Strategists indicate that investors are still not selective enough towards companies that are making high capital expenditures.

It has been noted that companies with high capex/sales ratios continue to outperform the overall market. In this context, Wilson highlights that there are significant opportunities in firms that integrate AI into existing business models rather than developing it, and this group has provided an average return of 1% better post-balance sheet.