The excitement round synthetic intelligence might have quietened after a unstable week for a few of the sector’s greatest names, however Morgan Stanley continues to see promise in a raft of European shares. “Indicators from the same ‘progress scare’ part within the mid1990s mushy touchdown … recommend to us that European semiconductors (together with different AI winners) are experiencing a tactical correction and may make new highs within the coming months,” the funding financial institution’s analysts wrote in an Aug. 8 analysis word. Morgan Stanley’s “European AI procuring record” contains names starting from semiconductor tools and information heart performs to software program and healthcare firms. These shares — described as “AI winners” by the financial institution — have returned round 44% on common since January 2023, outperforming the 14% bounce recorded by the MSCI Europe benchmark, the analysts famous. Listed below are 4 of their overweight-rated inventory picks to play the AI theme: ASML Morgan Stanley is bullish on Dutch chip machine maker ASML due to its “monopoly in forefront lithography tools.” “There is just one firm able to producing the acute ultraviolet (EUV) lithography instruments used to print design options on the required dimension for forefront chips, and that’s ASML,” analyst Lee Simpson stated of the corporate, which counts AI poster baby Nvidia and semiconductor big TSMC as key purchasers. ASML’s subsequent leg of progress, Simpson added, will come from further orders from TSMC because it produces its N2 know-how node, which is predicted for use in varied Apple merchandise from subsequent yr. Shares in ASML are traded on the Euronext Amsterdam and Nasdaq . Morgan Stanley has a goal value of 1,000 euros ($1,092) on the inventory, giving it over 27.5% potential upside. Segro Morgan Stanley describes British REIT Segro because the “landlord of Europe’s largest cluster of knowledge facilities.” The corporate’s £18 billion ($23.0 billion) portfolio contains 34 datacenters which generate 9% of group hire, analyst Bart Gysens famous. He added that Segro has “bold plans” to develop on this house, with its pipeline together with tasks with round £200 million of future hire to be delivered over the subsequent decade. Segro is listed on the London Inventory Trade and Euronext Paris, and trades as an American Depository Receipt (ADR) within the U.S. Morgan Stanley has a goal value of 1,050 pence on the inventory, giving it round 18.6% potential upside. SAP Morgan Stanley is betting on German participant SAP within the software program options house as it’s “nicely positioned to capitalize on the rising generative AI market alternative.” That is due to the massive amount of its enterprise information and “enterprise AI performance,” which is embedded into its core merchandise, analyst Adam Wooden wrote. He additionally sees important upside to margins as the corporate turns into extra environment friendly and expands its cloud gross margins. Shares in SAP commerce on the Frankfurt Inventory Trade and on the New York Inventory Trade . Morgan Stanley has a goal value of 224 euros on the inventory, giving it round 18.3% upside potential. Merck KGaA Additionally on Morgan Stanley’s record is German science and know-how agency Merck KGaA , which operates as EMD Group in the USA and Canada. Analyst Thibault Boutherin expects “AI-related demand to speed up progress for Merck KGaA’s Electronics enterprise.” Its semiconductor division contributes 12% of the corporate’s general gross sales. Merck is seeking to develop this by between 7% and 10% within the medium time period, “pushed by greater demand for complicated materials for AI semiconductor manufacturing,” Boutherin added. Shares in Merck KGaA commerce on the Frankfurt inventory alternate and as an ADR within the U.S. Morgan Stanley has a goal value of 200 euros on the inventory, which represents round 20% upside potential. — CNBC’s Michael Bloom contributed to this report.
