Morgan Stanley’s Wilson Says Tech Rally Can Run Further on AI

Core Viewpoint - US technology stocks have potential for further rallies driven by strong sales outlook related to artificial intelligence [1] Group 1: Revenue Growth and Valuations - Revenue growth expectations for major tech stocks have reached "multi-decade highs" while valuations have declined due to recent market volatility [2] - The Bloomberg Magnificent Seven index is currently trading at approximately 29 times forward earnings, slightly below its five-year average [6] Group 2: Market Dynamics and Investment Sentiment - Recent market volatility has created "attractive entry points" for stocks like Microsoft Corp. and Intuit Inc. [2] - The Nasdaq 100 experienced its largest weekly decline since December, raising concerns among investors about the returns on AI investments [3] Group 3: Capital Expenditure and Performance - Investors have not yet enforced discipline around capital expenditure, with stocks having higher capex-to-sales ratios continuing to outperform the broader market [6] - Companies that adopt AI in their core businesses are outperforming the market by 1% the day after reporting earnings [7] Group 4: Currency Impact and Earnings Rebound - A weaker dollar is providing a boost as Nasdaq 100 constituents derive about half of their revenues internationally [8] - There is a broader rebound in earnings upgrades across sectors including semiconductors, software, tech hardware, and the Magnificent Seven stocks [8]