Strategists at Morgan Stanley have indicated that despite recent volatility in artificial intelligence stock trading and ongoing questions about capital expenditures, the sector still has room for further growth.

A team led by Michael Wilson noted that the market continues to undervalue companies applying artificial intelligence, while AI-enabled firms retain strong fundamental advantages. They stated that the projected future revenue growth rate for major technology companies has climbed to its highest level in decades.

Notably, the forward price-to-earnings ratio for the group of seven leading tech stocks has fallen to 27 times, placing it only at the 12th percentile level since the AI boom began in early 2023.

The strategists believe that a weaker US dollar will boost the performance of these tech giants, given their significant exposure to international sales.

They pointed out that "based on median stock data, shares of AI application companies have outperformed the market by 1% on the first trading day following their earnings reports."

Additionally, Morgan Stanley's software analysis team identified what they call "attractive entry points" for Microsoft, Intuit, Salesforce, ServiceNow, Atlassian, Snowflake, Shopify, Cloudflare, and Palo Alto Networks.