Dear Reader,
This is Dylan Jovine with Behind the Markets.
Happy Wednesday.
Today is Wednesday, April 22nd.
What an amazing webinar we had yesterday.
Our most well-attended ever.
Thank you to everyone who joined us.
The Next Big Shift in AI
I want to follow up on the webinar because it dovetails perfectly with a new note out from Morgan Stanley on nine chip stocks they believe are about to become critically important.
And it all comes down to a massive change that is happening in AI right now.
Morgan Stanley is talking about what they call agentic AI.
Let me explain exactly what that means.
What Agentic AI Actually Is
Right now, you go to ChatGPT or Claude or Google Gemini, you type in a question, and it gives you an answer.
That's AI responding to a prompt.
Agentic AI is different.
Agentic AI is when you assign the AI a task and it executes on its own — without you being there.
Here's a simple example.
You tell the AI: every morning at 6:00 AM, I want my key numbers on my desk, pulled from this database and that database, formatted exactly like this.
And every morning, on its own, the AI does it.
No prompt required.
That is agentic AI.
Why This Changes Everything for Chips
As AI moves from responding to prompts to actually executing multi-step tasks on its own, the hardware requirements shift dramatically.
CPUs — central processing units, the kind Intel makes — are increasingly becoming the control layer for these agentic systems.
Memory demand is rising sharply too.
This is why we've seen rallies in Intel and ARM recently, while Nvidia has been consolidating at what I think is a very cheap valuation.
The AI story is starting to move past GPUs.
What Morgan Stanley Got Right
Morgan Stanley sees nine stocks as the biggest beneficiaries of this shift.
In CPUs and accelerators: Nvidia, AMD, Intel, and ARM Holdings.
In memory: Micron, Samsung, and SK Hynix.
In chip making and equipment: TSMC and ASML.
That is a solid list.
What Morgan Stanley Missed
Here is where their report falls short.
Every single one of those chip companies is going to need someone to package their chips.
And as these chips get more complicated — as manufacturers push micro pieces to assemblers who put them together rather than shipping fully assembled chips — the packaging step becomes dramatically more valuable.
This is exactly what we discussed in yesterday's webinar.
Packaging companies are moving up the value chain.
They used to be like a food packaging company — slapping a plastic box around a finished chip.
Now they are actually assembling the chip.
And when you move up a value chain, your returns on capital go higher and your business gets dramatically better.
Think about China.
China used to manufacture simple, low-margin goods.
Then they moved up the value chain into software, smart cars, advanced electronics.
Every country, every company wants to move up the value chain.
That is exactly what is happening in chip packaging right now.
The Investment Thesis in One Sentence
Every company on Morgan Stanley's list of nine beneficiaries uses this packaging company.
When their biggest customers do significantly more business and need higher value services, this packaging company benefits too.
Morgan Stanley wrote the whole report and missed the one company that sits underneath all nine of their picks.
And that is why we held the webinar.
If you missed it, make sure to watch the replay here right now.
Anyway, that's all I have for you today.
Have a wonderful day.
I'll see you tomorrow.
“The Buck Stops Here,”
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Written by Dylan Jovine