Morgan Stanley’s technology research team believe the best way to play artificial intelligence -related market themes is through mobile applications and equipment,
“Cloud AI’s emergence in 2023 has sparked a new era for the global tech industry, and we expect Edge AI to become the next thing to capture the world’s imagination … We expect the downturn in smartphones to end and a cyclical recovery to begin … We expect smartphone supply chain stocks to outperform both smartphone OEMs and PC supply chain stocks. In a recovery, smart-phone OEMs can likely offer new Edge AI features that benefit supply chain companies.
“Energy has been one of the best sectors in the S&P 500 since January. One of the charts that caught our eye in our end-of-week updates highlights how Materials, Energy and Industrials have been the best-performing S&P 500 sectors since the end of January. As such, we’ve been revisiting our Energy overweight in conversations this week.
“By one measure, equity market concentration today sits close to the highest level in nearly 100 years … One surprising conclusion of our analysis is that equities often continued to perform well following periods of extreme concentration … Like today’s market, the late 1990s Tech Bubble and the Nifty Fifty optimism of the early 1970s were characterized by elevated growth expectations for the largest stocks. In those episodes, peak concentration coincided with the peak of the equity bull market.