We recently compiled a list of the Morgan Stanley’s 15 Best European AI Stocks. In this article, we are going to take a look at where Merck KGaA (OTC:MKGAF) stands against Morgan Stanley’s other European AI stocks.
In August last year, investment bank Morgan Stanley released an investor note highlighting that even though the chaos around prominent AI firms had somewhat subsided, an AI rumbling in Europe was just about to begin. Analysts at the investment firm compared the AI buzz to historical similarities in the mid-1990s, just before the internet craze. According to Morgan Stanley analysts, European semi stocks were experiencing a tactical correction and would hit new highs in the coming months. The note further detailed that a basket of these equities, handpicked by these experts, and nicknamed AI winners, had returned close to 45% on average since January 2023, the beginning of the AI revolution. These firms had outperformed the 14% jump recorded by the MSCI Europe benchmark, per the research.
Read more about these developments by accessing 10 Best AI Data Center Stocks and 10 Buzzing AI Stocks According to Goldman Sachs.
In the months since, European AI stocks have experienced significant volatility, most recently influenced by global developments and investor sentiment. A notable event was the introduction of a low-cost AI model by Chinese startup DeepSeek, which raised concerns about the profitability of existing AI companies that rely on expensive chips and infrastructure. This led to a sharp decline in European tech stocks, with the European tech index dropping 5.8%, marking the worst decline since October 2024. However, the market showed resilience shortly after. European shares reached a record high, driven by gains in retail and utilities stocks as tensions in the tech sector subsided. European stock pickers are exploring established sectors such as utilities, professional data providers, and even copper miners to tap into the next wave of AI advancements. This approach reflects a strategic shift towards industries that can support and benefit from AI infrastructure and applications.
Read more about these developments by accessing 30 Most Important AI Stocks According to BlackRock and Beyond the Tech Giants: 35 Non-Tech AI Opportunities.
For this article, we selected companies based in Europe that have been benefiting from the AI boom. An important investor note by investment bank Morgan Stanley on European AI stocks formed the basis for this list. These stocks are also popular among hedge funds. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close-up of a hand reaching out to touch a virtual animation, demonstrating the power of the company’s IoT technology.
Merck KGaA (OTC:MKGAF)
Number of Hedge Fund Holders: N/A
Merck KGaA (OTC:MKGAF) is a multinational science and technology company headquartered in Germany. The chips division of the company contributes nearly 12% to the overall sales. In August 2024, Thibault Boutherin of Morgan Stanley noted that AI-related demand would accelerate growth for the electronics business of the firm in the coming months. The management of the firm hopes to achieve an annual growth rate of 7% to 10% in the medium term. The analyst had a price target of €200 on the shares, denoting an upside potential of 20%. Boutherin added that the firm could achieve growth targets driven by higher demand for complex materials for AI semiconductor manufacturing. Six months after this thesis was published, the stock has declined by more than 11%.
Overall MKGAF ranks 8th on our list of Morgan Stanley’s European AI stocks. While we acknowledge the potential of MKGAF as an investment, our conviction lies in the belief that some stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a stock that is more promising than MKGAF but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
