Investor darling Nvidia is dominating headlines once again after its earnings last week surpassed expectations on the back of the artificial intelligence boom. The chipmaker’s shares crossed $1,000 for the first time last Wednesday and are up around 170% over the past year. Morgan Stanley notes that the reaction to Nvidia’s first quarter results is “very telling on how much buying power still exists in the market.” “We are far from topping out on AI. This should be enough to sustain investor confidence in AI supply chain stocks in Asia,” the investment bank’s analysts wrote in a May 22 research note. Companies in Asia are set to get a boost in the second half of the year as demand for Nvidia’s H100 GPUs (graphic processing units) and Hopper chip series grows. This presents an “improving profit picture for the Asia AI supply chain,” the analysts noted, adding that “now is the time to take advantage of any potential pullback as the market rebalances.” While several companies stand out as good plays, the Wall Street bank said it is “most constructive” on stocks relating to graphic processing units, high bandwidth memory, custom chip design, manufacturing, testing and rail kits. Here are seven of Morgan Stanley’s overweight-rated stocks to play these AI themes: Overweight-rated stocks Among Morgan Stanley’s list of AI stock opportunities are South Korean tech giant SK Hynix and Taiwanese chipmaker Taiwan Semiconductor Manufacturing Company . Both companies have made headlines in the past year and analysts are largely bullish on their prospects. Of the 39 analysts covering SK Hynix, 35 have a buy or overweight rating on the stock, according to FactSet data, while 36 of 38 analysts covering TSMC have a buy or overweight rating on the stock. SK Hynix stocks are held in the iShares MSCI South Korea ETF (8.4% weight) and Franklin FTSE South Korea ETF (8.3% weight). Shares in TSMC are included in the iShares MSCI Taiwan ETF (25.1% weight) and Franklin FTSE Taiwan ETF (22.2% weight) Beyond the headline-makers, Morgan Stanley also sees potential in Japanese manufacturer Advantest Corp . Shares in the company are held in the Goldman Sachs ActiveBeta Japan Equity ETF (1.0% weight) and JPMorgan BetaBuilders Japan ETF (0.8%) Aside from these companies, the Wall Street bank named Taiwanese semiconductor companies Alchip Technologies , Andes Technology and AP Memory Technology, as well as Japanese filtration services provider Micronics in its list of “AI beneficiaries,” giving each of them over 50% upside potential. — CNBC’s Michael Bloom contributed to this report.
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