We recently compiled a list of the 15 Best European AI Stocks According to Morgan Stanley. In this article, we will examine where Infineon Technologies AG (OTC:IFNNY) stands among other European AI stocks approved by Morgan Stanley.
Investors are approaching the artificial intelligence (AI) boom in various ways, particularly since the end of 2022. While U.S. investors have primarily focused on sectors like semiconductors, software, and biotechnology, European investors seem to be taking a different route. They are making bullish calls on more established companies, including utilities, commodities, and professional data providers, marking what experts describe as the next phase of investments in the AI universe.
For instance, Bernie Ahkong, an analyst at UBS, recently pointed out that the initial phase of AI investment was centered around chipmakers (read more about this by accessing 33 Most Important AI Companies You Should Pay Attention To). The second phase saw investors shift towards industrial companies (read more about this by accessing 20 Industrial Stocks Already Riding the AI Wave), which supply components to data centers. Currently, the focus on utility and power firms indicates a potential third phase in the AI investment landscape. Analysts at Morgan Stanley have echoed these sentiments, suggesting that while the chaos surrounding major AI firms has subsided, an AI surge in Europe is on the horizon, reminiscent of the mid-1990s before the internet boom.
According to Morgan Stanley analysts, European semiconductor stocks are undergoing a tactical correction and are expected to reach new highs in the coming months. A selection of these stocks, dubbed AI winners, has returned nearly 45% on average since January 2023, significantly outperforming the 14% increase recorded by the MSCI Europe benchmark. One indicator of this trend is the rising demand for data centers. Kevin Restivo of CBRE has noted that demand for data center space in Europe is projected to exceed the supply of new stock for the third consecutive year, with AI demand further intensifying this issue.
Our Methodology
For this analysis, we selected European companies benefiting from the AI boom, guided by a significant investor note from Morgan Stanley on European AI stocks. These stocks are also favored by hedge funds. Why do we focus on stocks that hedge funds invest in? Research indicates that we can outperform the market by mirroring the top stock picks of leading hedge funds. Our quarterly newsletter selects 14 small-cap and large-cap stocks each quarter and has achieved a remarkable 275% return since May 2014, surpassing its benchmark by 150 percentage points (see more details here).
Infineon Technologies AG (OTC:IFNNY)
Number of Hedge Fund Holders: N/A
Infineon Technologies AG (OTC:IFNNY) designs, develops, manufactures, and markets semiconductors and semiconductor-based solutions globally. Despite geopolitical tensions and rapid industry innovation posing challenges, growth catalysts such as silicon carbide production and AI power business are fostering positive sentiment towards the company for the next two years. Often overlooked by chip investors, Infineon has a thriving AI power business, with recent earnings indicating that sales for this segment are expected to double by next year, surpassing €400 million.
Analysts predict that Infineon Technologies AG (OTC:IFNNY) will achieve EPS growth of 17% in the next fiscal year and 26% in the following year, with revenue growth of 9.5% and 12%, respectively. The company is also developing digital tools linked to AI, enhancing resilience against external factors like geopolitics and natural disasters.
Overall, IFNNY ranks 15th on our list of the best European AI stocks to consider according to Morgan Stanley. While we recognize IFNNY’s potential as an investment, we believe that some AI stocks offer greater promise for higher returns within a shorter timeframe. If you seek a more promising AI stock than IFNNY that trades at less than five times its earnings, check out our report on the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
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