Morgan Stanley: Asia Pacific 2026 Outlook: Prefer AI to Non-AI
Summaries are public. PDF access requires an active membership; all members have the same access. Sign in
Morgan Stanley assigns an "Attractive" rating to the Asia Pacific semiconductor sector for 2026, clearly advocating a preference for AI over non-AI investments. The outlook is anchored by three long-term demand drivers: technology inflation, AI cannibalization, and technology diffusion. The firm highlights that Chinese AI developments, particularly DeepSeek, are significantly boosting inference demand, although domestic GPU supply sufficiency remains uncertain. The report comprehensively covers foundries, memory, packaging, power semiconductors, and equipment, offering detailed valuations. Top AI-related picks include TSMC (Overweight, target 2,088 TWD), SMIC (target 80 HKD), MediaTek (target 1,588 TWD), and ASE Technology (target 308 TWD). In the memory space, which benefits from AI ripple effects, Winbond is a top pick alongside Phison and Nanya Tech. The investment logic suggests that rising costs and supply chain prioritization will suppress non-AI semiconductors, while generative AI diffusion into verticals like robotics and wearables will bolster AI demand. Consequently, the strategy emphasizes overweighting AI-exposed logic and memory names while remaining cautious on non-AI segments. Equal-weight or underweight ratings are applied to several names facing structural headwinds, including United Microelectronics and Hua Hong Semiconductor, reflecting a stark divergence in expected performance between AI and non-AI exposure.