Murata Manufacturing. Both are rated overweight, or an indication that the bank expects a stock or index to outperform its peers. The third is Broadcom, which it rated equal weight.
"We expect a return to enterprise-level innovation after nearly two decades of underinvestment in technology, which will shake up the current technology leadership that's more focused on consumer mobile engagement," Morgan Stanley wrote in a report this week. The bank said there could be a disruption to supply chains with the move to more data-driven technologies. "For the supply chain, the disruption could be more severe given both high dependence on PC and smartphone sales and the need to diversify manufacturing in the face of tariffs," it wrote. It was referring to the U.S.-China tariff war, which has caused companies to diversify their supply chains.
Morgan Stanley pointed out that personal computers and smartphones account for about 40% of revenue for the world's top ten component suppliers. For"The most challenged suppliers are too exposed to the smartphone and/or PC market, aren't investing enough in new markets, and tend not to have pricing power," it says in the report.
It flagged two stocks which might not fare well, as compared with their regional peers: Japan's Nissha and China's Visionox Technology. Both are rated underweight, or an indication that the bank expects a stock to underperform its peers.: The Taiwanese giant, Apple's largest manufacturing partner, has "solid exposure" to networking devices and cloud computing equipment, and "superior expertise in manufacturing," Morgan Stanley said.