On August 12, 2026, global investment bank Morgan Stanley made waves in the Korean stock market by announcing a significant change in its top pick among domestic technology stocks. For years, Samsung Electronics had held the coveted spot as Morgan Stanley’s most preferred Korean tech stock. But now, in a move that’s caught the attention of investors and analysts alike, Samsung Electro-Mechanics has taken the lead, with the investment bank maintaining an ‘Overweight’ rating and boosting its target price from 2,560,000 KRW to 2,620,000 KRW—a figure nearly double the company’s closing price that day.
This shift isn’t just about a new name at the top. According to Seoul Economic Daily, Morgan Stanley’s decision is rooted in the explosive growth of artificial intelligence (AI) data center investments and the resulting demand for key electronic components. While semiconductor giants like Samsung Electronics and SK Hynix have enjoyed the limelight thanks to the AI boom, Morgan Stanley believes the real winners in the next phase will be suppliers of critical parts like multilayer ceramic capacitors (MLCCs) and Ajinomoto build-up film (ABF) substrates—areas where Samsung Electro-Mechanics excels.
On the trading floor, the market responded quickly. Samsung Electro-Mechanics’ stock closed at 1,335,000 KRW on August 12, up 5.78% from the previous day, pushing its market capitalization to nearly 99.7 trillion KRW and ranking it fifth on the KOSPI index. Yet, the stock’s journey hasn’t been without turbulence—having peaked at 2,270,000 KRW on June 19, it had tumbled by 41.2% in less than two months. Despite this recent correction, Morgan Stanley sees plenty of upside, arguing that the company’s growth prospects aren’t fully reflected in its current share price.
So what’s driving this optimism? At the heart of Morgan Stanley’s analysis is the surging demand for AI servers from global tech giants. AI servers are power-hungry and require a far greater volume of high-performance MLCCs compared to regular servers. As companies like Google, Amazon, and Microsoft pour billions into building out their AI infrastructure, Samsung Electro-Mechanics finds itself in a prime position to supply these essential components. The investment bank notes that even non-AI customers are placing early orders, worried about potential shortages—a trend expected to support MLCC prices from the second half of 2026 through 2027.
"MLCC prices are expected to rise due to AI server demand, as AI servers consume more power and require more high-performance MLCCs," Morgan Stanley stated, as reported by EBN. The bank also highlighted that the AI-related sales portion of Samsung Electro-Mechanics is projected to grow from 20% in 2026 to 31% in 2027, with AI sales more than doubling over the period. This shift, they argue, will move the company’s profit structure away from the cyclical swings of traditional IT hardware and toward the more stable, recurring revenues tied to AI infrastructure.
The story doesn’t end with MLCCs. ABF substrates—critical for packaging advanced AI chips—are another growth engine. As AI chip designs become more complex, with larger sizes, more layers, and multi-chiplet configurations, the technical demands on substrates soar. Samsung Electro-Mechanics has secured multiple orders from U.S. ASIC (application-specific integrated circuit) companies and is expanding its new factory in Vietnam, aiming for completion by 2028. Morgan Stanley forecasts that ABF substrate sales could increase four to five times by 2030, a staggering growth trajectory that would fundamentally reshape the company’s revenue mix.
Technological advances are giving Samsung Electro-Mechanics a competitive edge. Embedding MLCCs directly into ABF substrates is becoming more common to enhance power stability, and the company’s ability to produce both components in-house creates synergies that competitors may struggle to match. There’s even talk of a new growth cycle beginning in 2028, centered around glass substrates—a development that could further expand the company’s addressable market.
It’s not just the top-line growth that has Morgan Stanley excited. The investment bank points out that Samsung Electro-Mechanics’ 2028 projected price-to-earnings (P/E) ratio is just 18 times—well below the historical peak of 30 times, despite stronger earnings growth. This suggests, in Morgan Stanley’s view, that the stock is undervalued and ripe for a valuation re-rating as the AI-driven transformation becomes more apparent in the company’s financials.
Morgan Stanley’s new target price of 2,620,000 KRW applies a P/E ratio of 33 times to projected 2028 earnings. The bank’s bullish scenario keeps the target at 3,000,000 KRW, while the bear case, reflecting potential market volatility, lowers it to 1,350,000 KRW. As Financial News reported, "Morgan Stanley expects AI data center investments to sustain strong component demand, leading to Samsung Electro-Mechanics’ margins and EPS estimates exceeding market consensus."
Market watchers have taken note of the upgrade. According to EToday, Samsung Electro-Mechanics was among the most searched stocks on Naver Pay Securities on August 13, alongside Samsung Electronics and SK Hynix, both of which also saw their shares rise on the back of favorable global trends. While Samsung Electronics kept its top spot in global NAND flash shipments in the second quarter, its share slipped from 32% two years ago to 25% as the company prioritized high-margin DRAM production. Meanwhile, SK Hynix is preparing to break ground on a new advanced packaging plant in Indiana, USA, later this month, underscoring the fierce competition in the semiconductor supply chain.
But it’s the shift in Morgan Stanley’s preference that’s generating the most buzz. As Hankyung put it, "The significance of the target price increase is overshadowed by the fact that the top pick has changed." The initial phase of the AI investment cycle was dominated by semiconductor heavyweights and memory products, but as data center investments persist, the focus is broadening to include the vital components that make these systems work. With its dual strengths in MLCCs and substrates, Samsung Electro-Mechanics is being re-evaluated by investors not as a traditional IT parts supplier, but as a key beneficiary of the AI infrastructure boom.
Morgan Stanley’s report suggests that if the anticipated increases in MLCC prices and ABF substrate orders materialize, their decision to favor Samsung Electro-Mechanics over Samsung Electronics could prove prescient. The bank’s analysis is clear: the company’s growth potential, fueled by AI, is not yet fully reflected in its stock price, and the coming years could see a fundamental re-rating as its role in the AI supply chain becomes ever more critical.
As the dust settles from this high-profile endorsement, all eyes will be on Samsung Electro-Mechanics to see if it can deliver on these lofty expectations and truly establish itself as the new powerhouse of Korea’s technology sector.