Investing.com-- Morgan Stanley (NYSE:MS) analysts identified Japanese equities poised to benefit from low-cost artificial intelligence advancements or withstand market disruption caused by the technology, according to their research note.
Analysts spotlighted companies such as Sony Group Corp (NYSE:SONY), Sumitomo Mitsui Financial Group (TYO:8316) Inc (NYSE:SMFG), and Kao Corp. (TYO:4452) as key players in navigating AI-driven volatility.
Morgan Stanley analysts emphasized two categories: "Adopters" leveraging AI to enhance operations, and "Protected" firms with resilient business models.
The analysis followed China’s DeepSeek releasing cost-efficient generative AI tools, which Morgan Stanley’s U.S. semiconductor team said would not derail hyperscalers’ spending plans but could accelerate adoption in Japan.
Analysts highlighted Sony Group and Sumitomo Mitsui Financial Group for their above-average AI integration and "Overweight" ratings.
Both firms, with market capitalizations of 20.6 trillion yen ($138 billion) and 15.3 trillion yen, respectively, are expected to capitalize on AI-driven efficiency gains, analysts said.
Security firm Sohgo Security Services Co Ltd (TYO:2331) and recruitment agency Jac Recruitment Co Ltd (TYO:2124) were also cited for their operational AI use and pricing power.
Household goods maker Kao Corp. (TYO:4452) and tech conglomerate NEC Corp. (TYO:6701) were named among "Protected" stocks, with minimal AI exposure but strong pricing power, according to Morgan Stanley analysts.
Kao and NEC are seen as stable investments amid sector turbulence, analysts noted.
They also highlighted Japan Airlines Co Ltd (TYO:9201) and railway operator Kyushu Railway Co (TYO:9142) for their insulation from AI disruptions.
Morgan Stanley’s screening criteria included AI exposure, pricing power, and analyst ratings. The report stressed monitoring earnings from U.S. tech giants this week for ripple effects on Japanese equities.
Market attention will sharpen on firms positioned to harness or sidestep AI’s impact as low-cost tools proliferate, analysts wrote. They maintained that Adopters and Protected stocks could outperform broader indices over the next 12–24 months.
The findings come as global investors reassess AI’s sectoral risks, with Japan’s tech and industrial sectors drawing heightened scrutiny.