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Investing.com -- Morgan Stanley updated its Top Pick in the European semiconductor sector, replacing BE Semiconductor with ASM International (AS:ASMI) due to a more attractive risk-adjusted setup, according to a new research note from the bank.
ASMI’s stock was significantly impacted during “Deepseek Day”, experiencing a 10% decline, making it the most affected name in Morgan Stanley’s European semiconductor coverage, the analysts noted.
However, the bank believes the outlook for wafer fabrication equipment (WFE) has improved, with ASML (AS:ASML), KLA, Lam Research (NASDAQ:LRCX), and SCREEN all pointing to stronger spending trends.
Morgan Stanley (NYSE:MS) highlighted that while ASMI has regained some ground, the stock still trades below pre-event levels, despite reaffirmed hyperscaler investment in semiconductor equipment.
This divergence has led the firm’s analysts to view ASMI as a better opportunity than BE Semiconductor in the current market environment.
“ASMI remains one of our preferred semiconductor equipment names in Europe—and potentially across our global coverage. The company is well-positioned to capitalize on the transition to next generation, Gate-All-Around (GAA), transistor structures in leading-edge Foundry/Logic, which we expect to drive meaningful revenue acceleration,” said Morgan Stanley.
They added: “We continue to see ASMI outperforming the broader WFE market decline (-6% Y/Y) by a considerable margin (+22%), supporting our positive stance.”
The research note also emphasized that stock-level dispersion is increasing, making it a stock picker’s market even as investors focus on broader macroeconomic drivers.
The bank explains that its Top Picks strategy has continued to outperform the MSCI Europe index, generating 8 percentage points of outperformance over the last six months and 31 percentage points since its 2021 inception.