Morgan Stanley names a ‘defensive’ cheap Taiwanese AI stock to own

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Morgan Stanley names a ‘defensive’ cheap Taiwanese AI stock to own

One Taiwanese stock has everything going for it — it’s not just a defensive play amid recent market choppiness, but it’s also an artificial intelligence trade, according to Morgan Stanley. That’s Wistron , a Taiwanese electronics firm that has partnered with Nvidia on various initiatives this year — such as developing a heat-flow simulator using AI — and that uses Nvidia platforms. “Wistron is a defensive AI stock to own amid recent market volatility,” Morgan Stanley wrote in an Aug. 6 report. “With such attractive risk-reward, Wistron ******** one of our preferred AI server [original design manufacturers].” Morgan Stanley sees recent rising demand for Nvidia’s Hopper platform — an Nvidia AI computing technology — as a positive for Wistron. “We see rising Hopper demand as slightly positive for Wistron, as they are still the main GPU baseboard (UBB) supplier for Hopper,” the bank said. It added that it expects demand for the Hopper product to rise 15% to 20% quarter on quarter by the third quarter, and 30% to 35% by the fourth quarter. Production volumes at Wistron should therefore start to ramp up from the first quarter of 2025, said Morgan Stanley. Morgan Stanley said valuation for the stock is “extremely cheap” right now, and gave it a price target of 168 New Taiwanese dollars ($5.10), implying upside of around 72%. “We also believe margins will continue to improve for Wistron as they focus less on consumer electronics and shift towards industrial/commercial products,” the bank’s analysts wrote. The current share price implies nine times 2025’s earnings per share, which the bank considers undervalued compared with the 15 to 20 times range that investors have been willing to pay for “downstream AI” stocks. Upstream AI refers to goods and services used by other companies, while downstream AI refers to products that have direct user interfaces. — CNBC’s Michael Bloom contributed to this report.

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