Artificial intelligence (AI) has transformed numerous industries, and according to Morgan Stanley’s technology research team, the best way to capitalize on AI-related market themes is through mobile applications and equipment. The team predicts that the emergence of Cloud AI in 2023 will usher in a new era for the global tech industry, with Edge AI, where computations occur at the individual user level, poised to capture the world’s imagination. This, in turn, is expected to lead to a recovery in the downturn of smartphones.
The team at Morgan Stanley believes that in a recovery, smartphone original equipment manufacturers (OEMs) can offer new Edge AI features that will benefit supply chain companies. Specifically, they expect system-on-a-chip (SoC) and memory players, which enable Edge AI, to outperform other smartphone components such as displays and cameras. With these insights in mind, the team has identified several key stock ideas that encompass companies such as SK hynix, MediaTek, Qualcomm, Samsung Electro-Mechanics, Will Semi, Goodix, Apple, Xiaomi, Transsion, Lenovo, and Asustek.
While AI continues to shape the future, there are other factors at play in the market as well. One such factor is the connection between stubborn inflation pressure and stronger crude prices, as observed by RBC Capital Markets’ head of U.S. equity strategy, Lori Calvasina. The energy sector, along with materials and industrials, has been among the best-performing sectors in the S&P 500 since January. Calvasina highlights the attractive valuations of the energy sector within the S&P 500 and points out that it serves as a useful inflation hedge in investment portfolios. Furthermore, she notes a modestly positive correlation between the performance of these sectors and trends in 10-year Treasury yields since 2010.
On a different note, Goldman Sachs’ chief U.S. equity strategist, David Kostin, sheds light on the concentration of the S&P 500. Despite the current high levels of concentration, Kostin emphasizes that equities have historically continued to perform well even after periods of extreme concentration. Drawing parallels to past episodes such as the late 1990s Tech Bubble and the Nifty Fifty optimism of the early 1970s, Kostin points out that concentrated markets often coincide with challenging macroeconomic backdrops. However, when the environment improves, investors typically rotate towards previously perceived risky stocks, leading to a reduction in market concentration. Kostin believes that a major shift in interest rates or a deterioration in the outlook for mega-cap earnings would be necessary for a significant change in the current concentration levels.
In conclusion, the future of artificial intelligence lies in harnessing the power of mobile applications and edge computing. By capitalizing on AI-related market themes through smartphones and enabling technologies such as SoC and memory players, investors can position themselves to benefit from the anticipated growth in the tech industry. Additionally, considering the connection between the energy sector, inflation, and crude prices, allocating investments to sectors like energy, materials, and industrials could serve as useful inflation hedges. Lastly, while market concentration is a concern, historical patterns suggest that concentrated markets have performed well in the past and a major shift in interest rates or earnings outlook would be necessary for significant change.
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FAQ
What is AI?
AI stands for artificial intelligence, which refers to the simulation of human intelligence in machines. It involves the development of computer systems capable of performing tasks that would typically require human intelligence, such as visual perception, speech recognition, decision-making, and problem-solving.
What is Edge AI?
Edge AI refers to the concept of performing AI computations directly on devices at the individual user level, rather than relying on cloud-based processing. This allows for faster processing, increased privacy, reduced latency, and more efficient use of network resources.
What sectors can benefit from AI?
Various sectors can benefit from the integration of AI technologies, including healthcare, finance, manufacturing, transportation, retail, and entertainment. AI has the potential to optimize operations, improve decision-making, enhance customer experiences, and drive innovation in these sectors.
How can investors benefit from the future of AI?
Investors can consider allocating their investments towards companies involved in mobile applications, equipment, and enabling technologies for Edge AI. By identifying key stock ideas within these areas, investors can position themselves to take advantage of the anticipated growth in the AI-related market themes. Additionally, investors can diversify their portfolios by considering sectors such as energy, materials, and industrials, which have historically performed well alongside inflation pressure.
The artificial intelligence (AI) industry is experiencing significant growth and transformation across various sectors. According to Morgan Stanley’s technology research team, one of the best ways to capitalize on AI-related market themes is through mobile applications and equipment. They predict that the emergence of Cloud AI in 2023 will bring forth a new era for the global tech industry. In particular, the team highlights the potential of Edge AI, which involves computations occurring at the individual user level. They believe that Edge AI will capture the world’s imagination and lead to a recovery in the smartphone industry. (source)
Within the recovery of the smartphone industry, smartphone original equipment manufacturers (OEMs) can leverage Edge AI features to benefit supply chain companies. The team at Morgan Stanley specifically mentions system-on-a-chip (SoC) and memory players as key components that enable Edge AI and are expected to outperform other smartphone components such as displays and cameras. This insight provides potential stock ideas for investors, including companies like SK hynix, MediaTek, Qualcomm, Samsung Electro-Mechanics, Will Semi, Goodix, Apple, Xiaomi, Transsion, Lenovo, and Asustek. (source)
While AI continues to shape the future, there are other factors at play in the market. RBC Capital Markets’ head of U.S. equity strategy, Lori Calvasina, highlights the connection between stubborn inflation pressure and stronger crude prices. The energy sector, along with materials and industrials, has been among the best-performing sectors in the S&P 500 since January. Calvasina points out that the energy sector’s attractive valuations make it a useful inflation hedge in investment portfolios. She also notes a modestly positive correlation between the performance of these sectors and trends in 10-year Treasury yields since 2010. These observations provide potential investment opportunities for those looking to diversify their portfolios and hedge against inflation. (source)
Goldman Sachs’ chief U.S. equity strategist, David Kostin, sheds light on the concentration within the S&P 500. Despite the current high levels of concentration, Kostin emphasizes that historically, equities have performed well even after periods of extreme concentration. He draws parallels to past episodes, such as the late 1990s Tech Bubble and the Nifty Fifty optimism of the early 1970s, where concentrated markets coincided with challenging macroeconomic backdrops. Kostin believes that when the macroeconomic environment improves, investors typically rotate towards previously perceived risky stocks, leading to a reduction in market concentration. He suggests that significant changes in interest rates or mega-cap earnings outlook are necessary for a major shift in the current concentration levels. (source)
In conclusion, the future of AI lies in harnessing the power of mobile applications and edge computing. Investors can position themselves to benefit from the anticipated growth in the tech industry by considering investments in companies involved in mobile applications, equipment, and enabling technologies for Edge AI. Additionally, considering the connection between the energy sector, inflation, and crude prices, allocating investments to sectors like energy, materials, and industrials could serve as useful inflation hedges. While market concentration is a concern, historical patterns suggest that concentrated markets have performed well in the past, and significant changes in interest rates or earnings outlook would be necessary for significant change.
The source of the article is from the blog japan-pc.jp