Non-artificial intelligence tech shares that struggled in 2023 have the potential for large positive factors in 2024, in keeping with Morgan Stanley. Tech analysts on the funding financial institution say AI and cloud computing shares are prone to proceed to develop, however their valuations are very excessive. After rising 230% this yr, shares of AI chip maker Nvidia at the moment commerce at a ahead price-to-earnings ratio of 24.7 instances, in contrast with the S&P 500’s 21.5 instances, in keeping with FactSet knowledge. Similarly, Microsoft inventory is up greater than 50% in 2023, however trades at 30.5 instances ahead earnings. Meanwhile, struggling non-AI tech shares may see gross sales and income speed up subsequent yr, in keeping with Wall Street banks. “We favor cyclically depressed non-AI tech shares over cloud AI in 2024,” Morgan Stanley analysts led by Sean Kim mentioned in a be aware to purchasers on Dec. 4. “The economic system may very well be compressed a number of instances,” the analysts added. Comparing firms which were very robust this yr (cloud AI) to this yr’s laggards, we see a number of expansions accelerating with gross sales and income within the second half of 2024. The desk beneath lists 14 “most most popular” shares that Wall Street banks think about to have “potential for rerating centered on pricing, progress, early cycles, and idiosyncratic earnings upside.” Here’s what occurred: Morgan Stanley expects early robust progress within the tech sector in early 2024 as firms restock inventories and provide chain points proceed to enhance. However, the financial institution warned that issues a few peak in progress and overstock may emerge by the second half of subsequent yr. Analysts mentioned the transition to a “extra regular” financial surroundings will profit conventional tech firms as demand returns, pricing energy will increase and the non-AI income recession ends. “We imagine that cloud AI winners will proceed to expertise great progress and will change into a part of expertise portfolios, however the efficiency will come from largely forgotten conventional expertise firms. ” they added. “Investors gravitate in the direction of thrilling applied sciences for excellent returns, however given the secure long-term returns and draw back safety they supply throughout unstable instances, they could think about boring shares throughout regular recoveries. The financial institution additionally cited TSMC and Samsung as main gamers with robust aggressive benefits that may climate the uncertainty. —CNBC’s Michael Bloom contributed reporting.