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MORGAN STANLEY: Cloud usage will more than double in the next two years -and that's great news for the stocks of these 8 high-tech companies
MORGAN STANLEY: Cloud usage will more than double in the next two years -and that's great news for the stocks of these 8 high-tech companies
Becky PetersonSep 8, 2018, 20:30 IST
Morgan StanleyGoogle, Facebook, Amazon and Microsoft are expected to make up 73% of overall capital expenditure growth in 2018, according to Morgan Stanley.
Tech titans like Amazon and Microsoft aren't the only ones that are benefitting from the mass migration of businesses to the cloud.
As cloud computing becomes more ubiquitous in the IT industry, those same cloud giants are ramping up the amount they're spending on servers and data center equipment - and that's great news for those vendors from whom they buy their hardware and software.
Today, public clouds account for just 20% of all computing workloads, but that percentage could grow to 48% by the end of 2020, according to Morgan Stanley.
In a report published on Tuesday, analyst Katy L. Huberty forecast that global capital expenditure spending among 14 major cloud companies will increase 35% in 2018, up from 16% growth in 2017. Morgan Stanley estimates that Google, Amazon, Facebook and Microsoft alone will account for 73% of that growth in 2018.
These forecasts are based on spending at the companies which Morgan Stanley identifies as the most likely to invest in cloud infrastructure. It also includes other capital expenditure investments that the company might make, as well.
Those dollars - spent by companies with large cloud businesses like Google, in addition to those who run their own clouds to power their business, like Facebook - will greatly benefit the vendors that sell data centers, servers and networking equipment.
These are the 8 companies Huberty said have the most to gain from the growing cloud industry.
Arista is a California-based networking company which contentiously competes with its rival Cisco in the space for network switches.
Currently, Arista trades around $266 a share, with a market cap of nearly $20 billion. Morgan Stanley has a price target of $310 per share for the company.
Aspeed
Aspeed is a Taiwanese company in the System in a Chip (SoC) space. The company sells chips for server management and desktop virtualization.
Aspeed trades on the Taipei Stock Exchange. It's currently valued at 744 Taiwanese dollars, but Morgan Stanley has a price target of 777 Taiwanese dollars, and expects the company to "bear fruit in 2019."
CyrusOne
CyrusOne is a Dallas, Texas-based real estate trust company, which invests in data centers from which other companies rent capacity. The company has partnerships with Amazon Web Services, Google Cloud Platform and Microsoft Azure to provide hybrid cloud solutions, in which their clouds integrate with CyrusOne-operated servers.
The company currently trades around $66 with a market cap around $6.6 billion. Morgan Stanley has a price target of $68.
Digital Realty
Digital Realty, like CyrusOne, is a real estate investment trust focused on data centers that rent out capacity.
The San Francisco-based company spiked in the last week and now trades around $122, but Morgan Stanley has a price target of $118.
LandMark Optoelectronics
LandMark Optoelectronics, a Taiwanese company that sells semiconductors, trades around 272 Taiwanese dollars, but Morgan Stanley expects it to raise to 345 Taiwanese dollars.
Intel
The microprocessor titan Intel trades at $46 per share, with a market cap of $214.67 billion. Morgan Stanley set its price target at $56.
Nvidia
Nvidia, a Santa Clara, California-based graphics processor company, made its name in video games. But Morgan Stanley expects to see extreme growth in the company's data center business — giving it the highest projected growth rate out of all of the companies listed.
Its valuation is high "due to open ended nature of virtual reality, autonomous driving, and data center opportunities," according to the report. It turns out that Nvidia's graphics hardware are also really good for artificial intelligence and other processor-intensive applications.
Nvidia currently trades near $272, near Morgan Stanley's price target of $273.
Seagate
Seagate, a Cupertino, California-based data storage company, has tanked in recent days after being downgraded by analysts at Evercore and Goldman Sachs. But Morgan Stanley maintains its high hopes.
Seagate currently trades at near $50, and Morgan Stanley has a price target for the company of $78.