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Global Technology：Navigating 2025 AI cloud investment
Morgan Stanley·2024-08-13 09:15

Industry Investment Rating - The report maintains an In-Line rating for the technology sector, with specific sub-sectors such as Greater China Technology Semiconductors, Electronic Components Japan, and IT Hardware also rated as In-Line [1] - The North America Semiconductors sector is rated as Attractive, indicating a positive outlook for semiconductor companies in this region [1] Core Report Insights - The report highlights a median expectation of 37% Y/Y growth for NVIDIA-related stocks and 14% Y/Y growth for non-NVIDIA-related stocks in 2025 [1] - Global cloud capex is expected to grow 20-25% Y/Y in 2025, significantly higher than the current tracker of 8% growth [1] - The report introduces a 4 X 4 Matrix to map out 16 scenarios for cloud capex growth, helping investors assess upside and downside risks for 46 covered stocks [1] Cloud Capex and AI Investment - The report emphasizes the importance of AI cloud investment, particularly in areas like networking, CPU servers, and utilities, as the technology landscape evolves [1] - NVIDIA-related capex is projected to grow 37% Y/Y in 2025, driven by strong demand for AI infrastructure, while non-NVIDIA capex is expected to grow 14% Y/Y [1] - The report identifies Wiwynn and Advantest as outliers with significant growth potential in the AI supply chain [1] Key Companies and Stock Implications - TSMC is expected to see tight supply for leading-edge foundry capacity in 2025, with potential price hikes for CoWoS capacity by 20% [9] - MediaTek is expanding its partnership with Arm to develop server CPUs, positioning itself as a competitor to NVIDIA in the AI chip market [10] - Alchip is projected to see >50% Y/Y growth in AWS project revenue, driven by 7nm projects [11] - Aspeed is highlighted as a key NVIDIA-related play, with its new AST2700 chip expected to gain traction due to its integration of the LTPI protocol [12] - Dell Technologies is positioned to benefit from AI server demand, with 50k HGX AI server builds expected in 2024, potentially driving 11BinAIserverrevenue∗∗inFY25[14]NVIDIAandCompetitors−∗∗NVIDIA∗∗isexpectedtosee∗∗1811B in AI server revenue** in FY25 [14] NVIDIA and Competitors - **NVIDIA** is expected to see **18% Y/Y growth** in datacenter revenue in 2025, driven by strong demand for its Blackwell and Rubin platforms [15] - **Broadcom** is projected to grow its AI exposure, with non-AI semis expected to rebound in late 2025 [16] - **Marvell** is seen as a beneficiary of AI growth but remains **Equal-Weight** due to valuation concerns [17] Networking and Infrastructure - **Cisco** is expected to benefit from networking growth, with a **1bn FY25 AI order target [19] - Arista is positioned to capture a growing portion of the AI networking opportunity, with an incremental 5bnAInetworkingopportunity∗∗by2027[21]−∗∗Infinera∗∗and∗∗Ciena∗∗areexpectedtobenefitfromincreasedinter−datacentertraffic,thoughgrowthisseenasalonger−termopportunity[22][20]EuropeanDataCenterGrowth−TheEuropeandatacentermarketisexpectedtogrow∗∗5xby2035∗∗,drivenbyincreasedcloudificationandAIadoption[126]−Keyinvestmentsinclude∗∗AWS′s5bn AI networking opportunity** by 2027 [21] - **Infinera** and **Ciena** are expected to benefit from increased inter-data center traffic, though growth is seen as a longer-term opportunity [22][20] European Data Center Growth - The European data center market is expected to grow **5x by 2035**, driven by increased cloudification and AI adoption [126] - Key investments include **AWS's 17bn investment in Spain and Microsoft's £2.5bn investment in the UK [126] Conclusion - The report concludes that cloud capex growth in 2025 will be driven by both NVIDIA-related and non-NVIDIA-related investments, with significant upside potential for companies in the AI supply chain [1][33]