Unlock Premium Data: Up to 50% Off InvestingProCLAIM SALE

MS 'surprised' AI stocks are not pricing in potential Chinese invasion of Taiwan

Published 05/21/2024, 09:41 AM
© Reuters.
NVDA
-
AMD
-
TSM
-
SOX
-

Morgan Stanley's US strategists highlighted a potential risk factor for chip stocks that have been riding high on the artificial intelligence (AI) wave. The strategist pointed out that these stocks might need to account for a risk premium due to the possibility of a Chinese invasion of Taiwan.

The strategists expressed surprise that, despite the geopolitical risks, there has been no risk premium incorporated into the valuation of these AI-driven semiconductor stocks.

"We don’t think it’s a high risk, but it is a risk. There should be some risk premium built into that," the broker's strategists said during a Bloomberg TV interview.

Moreover, the strategist remarked that semiconductor companies have yet to fully realize the benefits of AI in their financial results. Despite the current enthusiasm for AI, the strategist suggested that many companies have been overvalued because of limited investment opportunities.

"Because there has been a dearth of opportunities," the strategist said, explaining why some stocks might be overpriced.

"AI is everywhere but in the numbers."

The strategist also noted that for the past year and a half, investors have been eager to jump on any promising trend due to the overall lackluster growth in earnings. This eagerness is seen as a reason for the heightened interest in AI-related stocks.

Today's comments come just a day after Morgan Stanley raised its price target on the S&P 500 to 5,400 from the prior 4,500.

Morgan Stanley strategists also said that they still can't rule out a recession in the United States. 

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.