Morgan Stanley Says AI Trade Has 'More to Go' as Selloff Eases

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Transcript

00:00I think there's a lot of concerns about the AI trade.

00:03I mean, if you look at our kind of global view on AI,

00:06we think that we're going to pass this storm

00:08and there's more to go in the AI trade,

00:10but this isn't the first time that you've had weakness

00:13and kind of bubble concerns.

00:15And in Europe, if I bring it back to Europe,

00:18what we've seen in recent kind of last couple of months

00:21is a catch-up trade among the pockets of AI exposure,

00:24very strong, I would even call it a melt-up

00:27in some of those pockets of exposure.

00:29And those are the ones that you guys were mentioning,

00:31some of the ones that are weakest today.

00:33Well, talk to us then about,

00:35we've been having a conversation about breadth this morning,

00:37that some of these pockets where you are seeing perhaps a melt-up

00:39or you are seeing that momentum,

00:40it does feel like it is an AI, it's a tech story.

00:43But if there are valuation concerns that are associated

00:46with the NVIDIA, Alphabet, you name your tech company kind of story,

00:51does those valuation concerns then expand to the Novo Nordics,

00:54the LVMHs, the Rheinmetalls,

00:56given that those valuations are also looking frothy

00:58or is this tech-specific?

01:00Yeah, I mean, it really varies across those stocks that you mentioned.

01:05But let me keep it on AI.

01:08And if you look at pockets of AI exposure,

01:11so within semis,

01:13even utilities has gotten an AI bid in Europe recently

01:16because the view is as data centers are built,

01:19power prices are going to go up ultimately in Europe.

01:21If you look at some of those heavyweight stocks in those sectors,

01:26their valuations looking 2027, let's say multiples,

01:31are in line with US peers,

01:33but US peers are growing much faster.

01:35So you have this kind of scarcity valuation premium in Europe.

01:40So I think those pockets are vulnerable

01:42when you get these kinds of sell-offs in Europe as well.

01:44So I'll see you next time.