published Apr 10, 2018 3:29:03 PM, by Janine Wolf
(Bloomberg) —

With the technology sector making headlines left and right, Morgan Stanley is optimistic about the future of both the industry and its stocks.

A new data-driven technology cycle is just starting and offers huge potential on the investing front, Morgan Stanley analysts including Katy Huberty wrote in a report on Monday. This is the first computing cycle in which a number of technologies are emerging at once, they said, citing the “Internet of Things,” artificial intelligence and virtual or augmented reality, and automation.

“The dawning data-centered computing cycle can double incremental enterprise technology investment over the next 10 years and speed broader productivity growth for the first time in 20 years,” the analysts said. They see an opportunity for data technologies to push forward $1.6 trillion in incremental IT investment in 10 years, more than double the $740 billion on average that was added in each of the previous three cycles.

Morgan Stanley noted signs of a scenario “beginning to play out” in which semiconductors have taken the lead as the best-performing sector in 2017.

Value creation is likely to shift to infrastructure providers next, they said, citing strong moves by Cisco, Hewlett Packard Enterprise and Seagate Technology 2018 year-to-date. Finally, cloud providers who can monetize a computing platform with software and services are well-positioned for growth, such as Amazon and Microsoft — and increasingly IBM and Alibaba.
Here’s a list of the 15 stocks Morgan Stanley sees benefiting most in the “Data Era”: The analysts said these technological changes aren’t risk-free, given potential data security risks and workforce upheaval. However, they are largely upbeat on the changes they see coming.

“We expect the best performing stocks in the technology sector could broaden from consumer- to enterprise-oriented technology providers, challenging the consensus view and positioning that exists in the market today,” the note said. “From a broader market perspective, technology advantages likely will permeate more and more sectors, elevating industry leaders who best leverage data across their entire value chain.”

To contact the reporter on this story: Janine Wolf in New York at jwolf71@bloomberg.net To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net Joanna Ossinger, Andrew Dunn

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