Morgan Stanley: Asian Semiconductor Investors Shift From Price-Driven to Volume Growth
A Morgan Stanley report summarizing feedback from Hong Kong investors on Asia's semiconductor sector says investors are shifting from price-driven stocks to volume-growth names.
A Morgan Stanley report summarizing feedback from Hong Kong investors on Asia's semiconductor sector says investors are shifting from price-driven stocks to volume-growth names.
The report identifies the return on invested capital (ROIC) from AI capital spending as the most important metric to track for future hardware demand. Total cloud capital expenditure is expected to reach about US$1.5 trillion in 2027, with memory accounting for 53% and compute—including GPUs, ASICs and CPUs—accounting for 20%.
Power supply remains a global bottleneck. The report estimates implied total power consumption for GPUs and ASICs at about 38 gigawatts in 2027.
Morgan Stanley's core positive rating-rated names are TSMC, ASE, ASM Pacific, MediaTek—its key name discussed—as well as Aspeed, Hygon, Montage and GUC. Within memory, the report prefers DDR4 DRAM, including Nanya and Winbond, over NAND module makers Phison and Longsys.
The report highlights avoiding lower-end commodity stocks that cannot successfully raise prices, including GWC and Silergy.
In summary, Morgan Stanley favors the volume-growth thesis and maintains core positive rating views on TSMC, ASE, ASM Pacific, MediaTek, Aspeed, Hygon, Montage and GUC. In memory, it prefers DDR4 DRAM names Nanya and Winbond over NAND module makers Phison and Longsys, while avoiding lower-end commodity stocks that cannot raise prices. AI capital-spending ROIC and power-supply constraints are the key variables to monitor.
The report characterizes TSMC, ASE, MediaTek, Nanya and Winbond as positive exposures, with MediaTek designated a key name discussed. It views Phison, Longsys, GWC and Silergy negatively. Potential catalysts include global cloud service providers continuing to raise capital-spending guidance in their second-quarter earnings reports; official statements from cloud service providers that AI investment is generating returns; potential share buybacks by memory companies, described as the "next catalyst"; and SpaceX announcing the adoption of Nvidia's Vera Rubin architecture.
The report identifies the return on invested capital (ROIC) from AI capital spending as the most important metric to track for future hardware demand. Total cloud capital expenditure is expected to reach about US$1.5 trillion in 2027, with memory accounting for 53% and compute—including GPUs, ASICs and CPUs—accounting for 20%.
Power supply remains a global bottleneck. The report estimates implied total power consumption for GPUs and ASICs at about 38 gigawatts in 2027.
Morgan Stanley's core positive rating-rated names are TSMC, ASE, ASM Pacific, MediaTek—its key name discussed—as well as Aspeed, Hygon, Montage and GUC. Within memory, the report prefers DDR4 DRAM, including Nanya and Winbond, over NAND module makers Phison and Longsys.
The report highlights avoiding lower-end commodity stocks that cannot successfully raise prices, including GWC and Silergy.
In summary, Morgan Stanley favors the volume-growth thesis and maintains core positive rating views on TSMC, ASE, ASM Pacific, MediaTek, Aspeed, Hygon, Montage and GUC. In memory, it prefers DDR4 DRAM names Nanya and Winbond over NAND module makers Phison and Longsys, while avoiding lower-end commodity stocks that cannot raise prices. AI capital-spending ROIC and power-supply constraints are the key variables to monitor.
The report characterizes TSMC, ASE, MediaTek, Nanya and Winbond as positive exposures, with MediaTek designated a key name discussed. It views Phison, Longsys, GWC and Silergy negatively. Potential catalysts include global cloud service providers continuing to raise capital-spending guidance in their second-quarter earnings reports; official statements from cloud service providers that AI investment is generating returns; potential share buybacks by memory companies, described as the "next catalyst"; and SpaceX announcing the adoption of Nvidia's Vera Rubin architecture.