In today’s rapidly evolving market, investing in stocks with a growing exposure to artificial intelligence (AI) is seen by many as a strategic move that could potentially lead to outperformance. According to analysts at Morgan Stanley, the AI revolution has been a key driver behind the current bull market rally, with companies like Nvidia at the forefront of this trend. Year to date, shares of Nvidia have surged 142%, following a remarkable 239% increase in 2023.
Morgan Stanley’s team of strategists, led by Edward Stanley, has identified a group of stocks where AI is increasingly becoming a crucial part of their business models. These companies, dubbed “the enablers,” have shown impressive returns so far in 2024. Since January, the so-called “core-to-thesis” enablers have outperformed their “moderately exposed” counterparts by a significant margin, returning more than 100% compared to just 25%.
Potential Investment Opportunities
One company that has caught the attention of Morgan Stanley is First Solar, a solar technology firm whose shares have jumped 59% this year. Analysts covering the stock remain optimistic, with most rating it a buy, albeit with a slight downside according to consensus price targets. Both Morgan Stanley and Goldman Sachs have reiterated their buy ratings on First Solar, citing favorable tailwinds that could drive further growth.
Broadcom, a semiconductor manufacturer, has also been highlighted by Morgan Stanley as an AI enabler. Despite already rallying over 25% this year, the stock continues to be popular among analysts, with most recommending a buy. Bernstein Research named Broadcom one of its best ideas, praising its affordability compared to peers and its strong narrative. JPMorgan and Melius Research have also expressed bullish sentiments towards Broadcom, with overweight and buy ratings, respectively.
Meta Platforms, the parent company of Facebook and Instagram, is another player in the AI space that has seen substantial growth in its stock price, up nearly 41% this year. Analysts are overwhelmingly positive about Meta, but the average consensus price target suggests only a modest 3% upside. Raymond James recently raised its price target on the stock, indicating a potential 11% increase in share value. Analysts believe that Meta’s leadership in fundamental GenAI building blocks is underappreciated by the market.
Investing in stocks with a rising exposure to artificial intelligence could be a lucrative strategy in today’s market environment. While some companies have already experienced significant gains, there may still be opportunities for investors to benefit from the AI revolution. As always, thorough research and due diligence are essential when considering any investment decisions in this rapidly-changing landscape.