2 Top Asia Chip Stocks for AI Growth: Morgan Stanley’s Picks

Morgan Stanley has identified TSMC and Winbond as premier Asian chip stocks positioned to capitalize on AI expansion, upgrading the industry outlook for the sector to "Attractive" heading into H2 2025. TSMC, a top choice, is significantly expanding its CoWoS capacity to 93,000 wafers per month by 2026, addressing NVIDIA bottlenecks, and recently reported Q2 2025 consolidated revenue of NT$933.79 billion. Winbond is Morgan Stanley's top pick, reflecting a strong preference for AI-related chip stocks and anticipating further sector revaluation as tariff and foreign exchange concerns diminish, underscoring both companies' strategic importance in meeting sustained AI-driven semiconductor demand.

Analysis

Morgan Stanley has upgraded its outlook on the Asian semiconductor sector to "Attractive" for the second half of 2025, signaling strong conviction in AI-driven growth. The firm's analysis highlights a clear preference for AI-related chip stocks and anticipates a sector revaluation as concerns over tariffs and foreign exchange impacts diminish. Taiwan Semiconductor Manufacturing Company (TSMC) is identified as a premier choice, underpinned by a strategic plan to double its CoWoS and SoIC capacity in 2025 and expand CoWoS to 93,000 wafers per month by 2026, directly addressing production bottlenecks for key clients like NVIDIA. This operational expansion is supported by strong fundamentals, including a reported Q2 2025 consolidated revenue of NT$933.79 billion and net income of NT$398.27 billion, and is further validated by a reiterated "Outperform" rating from Bernstein. Concurrently, Morgan Stanley designated Winbond as its top sector pick, positioning it as a prime vehicle for investors to gain exposure to key 2026 investment themes centered on artificial intelligence.

Key Decisions for Investors

• Given TSMC's robust capacity expansion plans aimed at serving high-demand AI markets and its strong reported Q2 2025 earnings, investors could consider the stock a core holding for exposure to the advanced semiconductor fabrication industry.
• Investors seeking a higher-conviction AI play should evaluate Winbond, which Morgan Stanley has designated as its top pick in the sector, citing it as an excellent opportunity for exposure to 2026 investment themes.
• The broader sector upgrade to "Attractive" by a major investment bank suggests a potential re-rating for Asian chipmakers, warranting a portfolio review to ensure adequate exposure to companies with direct AI catalysts.
• Monitor TSMC's capital expenditure guidance closely, as the report notes that capacity expansion may slow in 2026, a factor that could influence the long-term growth trajectory beyond 2025.