BorgWarner (BWA) has a clear path to diversify its earnings base beyond its strong automotive business, with its power portfolio presenting a high growth and margin expansion opportunity, Morgan Stanley said in a Tuesday note.

The company's core auto business continues to serve as a durable earnings foundation, evidenced by its drivetrain and turbo/thermal segments contributing about 79% of 2025 sales, the brokerage noted. Continued demand for traditional internal combustion engines and hybrids should back BorgWarner's positive auto outlook, Morgan Stanley added.

BorgWarner is also set to see growing opportunity from the artificial intelligence power shortfall, with its Turbine Generator power solution, the investment firm said.

The company's Turbine Generator could reach deployments of almost 3 gigawatt annually by 2030, pushing the distributed power segment's earnings before interest, taxes, depreciation, and amortization to roughly $1.20 billion by the same year, Morgan Stanley added.

Morgan Stanley upgraded BorgWarner to overweight from equal-weight, and raised its price target to $95 from $71.

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