A senior executive at Morgan Stanley says investors who are piling into mega-cap tech in search of returns are looking in the wrong place, and that current market conditions are actually opening up more compelling opportunities elsewhere.
In a new CNBC interview, Morgan Stanley executive director Katerina Simonetti says the AI trade is entering a new phase that changes where the real value lies.
“We’re moving into this phase two of the AI implementation. We built up the technology. We have it in place. Now we get to sit back and watch the actual results of this technology and how it’s going to increase the profitability of the companies here.”
Simonetti says that while indices remain the best vehicle for long-term participation in the AI story, market corrections are creating more targeted opportunities in specific sectors and individual securities. She also says the bank is equal-weight tech and communications, believing there are undervalued sectors that investors should pay attention to.
“They’re valued at this point. It’s probably not the most exciting buying opportunity there. We see a lot more in financials, in healthcare and in industrials.
At the same time we also are trying to tell investors that being opportunistic and being opportunistic and being offensive, it’s not necessarily trying to chase returns, trying to chase Mag 7, but identifying companies with pricing power that are able to create revenue, even if demand for their services is coming down, even if their consumer sentiment is a little bit lower than we’re expecting it.”
As of Friday’s close, the S&P 500 is trading at 7,126.
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