Key facts
- Morgan Stanley analysts believe AI is a matter of national competitiveness and security, driving government intervention.
- The bank has identified a theme called "AI sovereignty" which suggests governments will favor domestic AI capacity and control.
- This trend implies increased investment in domestic data centers, power generation, localized cloud infrastructure, and parallel technology stacks.
- Morgan Stanley has compiled a list of US-traded stocks that are expected to benefit from this AI sovereignty and localization trend.
- Each stock on the list has at least a 20% upside potential to Morgan Stanley's base-case price target.
Governments worldwide are increasingly viewing artificial intelligence as a strategic asset, leading to a focus on "AI sovereignty" to ensure domestic control over AI capabilities and infrastructure. Morgan Stanley analysts, in a note led by Ariana Salvatore, highlighted this trend, stating that governments are likely to prioritize control over compute, data, energy, talent, models, and supply chains as AI becomes a source of national economic and geopolitical power.
This strategic focus translates into government support for domestic AI infrastructure buildouts and restrictions on the flow of certain technologies. The bank anticipates a need for more domestic and regional data centers, increased power generation and transmission, localized cloud and networking infrastructure, and potentially parallel technology stacks to achieve sovereign capacity.
Morgan Stanley believes this environment will continue to benefit specific companies in the AI sector, labeling AI sovereignty as one of the fastest-growing themes in the market. The bank has identified a list of US-traded stocks that are expected to gain the most from this trend, each with at least a 20% upside potential to their base-case price targets. These stocks are categorized by their importance to the AI sovereignty thesis, with "Core to Thesis" signifying the highest relevance.
Among the highlighted companies are SpaceX (Ticker: SPCX), rated Overweight with a target price of $300, indicating a +105% upside. Amkor Technology (Ticker: AMKR) is rated Equal-weight with a target price of $70, offering a +26% upside. ACM Research (Ticker: ACMR), rated Overweight with a target price of $130, presents a +60% upside. Alibaba Group Holding (Ticker: BABAMateriality: Significant) is also listed with an Overweight rating and a target price of $180, suggesting a +44% upside. KLA is also mentioned in the list.