Morgan Stanley names its top semiconductor stocks for 2022

Published Mon, Dec 20 20216:48 PM EST

Analysts at Morgan Stanley have struck a more cautious tone on semiconductors stocks — but still think a number are going to outperform next year. Morgan Stanley has forecast semiconductor sales growth of 7.7% in 2022 — the third consecutive year of growth, but significantly lower than the projected growth of 23.8% for 2021. An unprecedented global chip shortage has contributed to the strong performance this year, but Morgan Stanley now sees "growing evidence" of improving semiconductor supply. Nevertheless, semiconductor stocks associated with secular trends could continue to do well, the analysts led, by Shawn Kim, said. A number of chip stocks make Morgan Stanley's list of "key stock preferences" for 2022. Its "top picks" include giants like Samsung Electronics , which Morgan Stanley said is "levered to an economy still in an upswing and can weather a cyclical downturn," as well as smaller integrated circuit design companies, such as Taiwan's ASmedia . The increasing digitalization of the global economy, particularly in transportation, should also benefit automotive semiconductor stocks, with Japan's Renesas the bank's top pick in this space. The company is "one of the most undervalued automotive/industrial semi stocks globally," Kim said. Meanwhile, China's push to reduce its reliance on foreign technology and achieve technological independence could benefit Taiwan fabless chip maker Alchip , with Morgan Stanley viewing the company as among the "key enablers" of this trend. China's Hangzhou Silan Microelectronics makes the list too, with the company viewed by the bank as a "key beneficiary of China's power semi localization trend, specifically content growth of inverter-type home appliances and vehicle electrification." Other stock picks As the metaverse continues to take off, the bank sees MediaTek as its top pick to benefit from this trend. The bank also favors hardware companies such as Chinese acoustics components manufacturer GoerTek . All of the above stocks are rated overweight by the bank. Investing in companies exposed to secular trends could offer the prospects of superior returns, the bank said. "These companies are growing because the world has changed, not because of Covid. Although expensive, these stocks could work very well in view of superior growth, enabling consumption we need most every day even through a recession and with potential to be game changers in the longer term," Kim said.

Morgan Stanley's headquarters in New York.

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Analysts at Morgan Stanley have struck a more cautious tone on semiconductors stocks — but still think a number are going to outperform next year.