How Morgan Stanley says to play the next wave of the AI trade

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Markets,Ciena Corp,NVIDIA Corp

Data centers are poised to serve as essential components of AI investment in the future, given the computational power the technology requires.

As the field of stocks that both serve artificial intelligence data centers and have outperformed the rest of the market grows, Morgan Stanley is changing its approach in a search for value. De facto market leader Nvidia alone has soared more than 700% since the start of 2023. The company has become the face of AI investment on Wall Street, helping lift the broader market to record highs in recent weeks.

mountain Ciena Corporation stock. The networking company can benefit from an AI opportunity that has yet to play out, tied to its WaveLogic 6 broadband application that Morgan Stanley predicts will be adopted at a faster pace than previous generations and used in data centers. Marshall also noted Ciena will in turn be a key beneficiary of rising data center demand to power AI.

mountain Nvidia stock. But Marshall noted that despite Nvidia already benefiting from Wall Street's enthusiasm for all things AI, the gains are justified by its serving the benchmark against which all other AI beneficiaries are measured. The analyst labeled Nvidia as "the poster child for AI infrastructure investment." "In general, we prefer names that see revenue sooner, i.e., NVDA, and competitive positioning is superior to any of the other names within the analysis.

 

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