Overview#
Morgan Stanley has upgraded its outlook for several Japanese electronics component makers, naming TDK as its top choice. This decision is based on expectations for robust production of high-end smartphones and increasing demand in AI data centers.
TDK's Position in the Market#
The investment bank anticipates that the production of high-end smartphones in North America will remain strong through 2026 and beyond. TDK is well-positioned to benefit from this trend, particularly through its sales of high-value products such as metal-case rechargeable batteries and silicon-anode rechargeable batteries.
AI and Data Center Opportunities#
In the AI and data center sector, TDK has resumed shipments of hard disk drive heads to major companies like Western Digital and Seagate Technology. Morgan Stanley expects TDK to start shipping rechargeable batteries for AI and data center backup units by fiscal 2027, with significant sales growth anticipated from fiscal 2028 onward. The bank predicts TDK's earnings will surpass market expectations.
Other Companies in Focus#
Morgan Stanley has also upgraded Alps Alpine to an overweight rating due to its supply of camera actuators for high-end smartphones. They expect new camera features in 2026 models to enhance the value of these actuators. Meanwhile, Murata Manufacturing maintains an overweight rating, with anticipated profit growth from its core multilayer ceramic capacitor products.
Caution on Ibiden and Hamamatsu Photonics#
Conversely, Morgan Stanley has issued underweight ratings for Ibiden and Hamamatsu Photonics. Ibiden, which supplies substrates for AI servers, has lowered its earnings guidance for fiscal 2026. Hamamatsu Photonics, while having potential in quantum computing, is expected to face its fourth consecutive year of earnings decline by the end of September 2026.