Non-artificial intelligence tech stocks that have struggled in 2023 have significant upside potential in 2024, according to Morgan Stanley. The investment bank’s tech analysts say that while AI and cloud computing stocks will likely continue to grow, their valuations are very high. AI chip maker Nvidia ‘s stock — after rising by 230% this year — currently trades at 24.7 times forward price to earnings compared to the S & P 500 ‘s 21.5 times, according to FactSet data. Similarly, Microsoft ‘s shares are up more than 50% in 2023 yet trade at 30.5 times forward earnings. Meanwhile, according to the Wall Street bank, beaten-down non-AI tech stocks could see accelerating revenues and earnings next year. “We prefer cyclical depressed non-AI tech stocks over cloud AI in 2024,” the analysts led by Morgan Stanley’s Shawn Kim said in a note to clients on Dec. 4. The analysts added that there was a potential for “multiple compression of the names that have done really well this year (cloud AI)” compared to this year’s laggards where they see “multiple expansion driven by revenues and earnings accelerating in the back half of 2024.” The table below lists the 14 ‘most preferred’ stocks the Wall Street bank sees as having “re-rating potential around pricing/growth, early cycle and idiosyncratic earnings upside”: Morgan Stanley anticipates initial robust tech sector growth in early 2024 as companies restock inventories and supply chain issues continue to improve. However, the bank warned that concerns around peak growth and inventory gluts could emerge by the second half of next year. The shift to a “more normal” economic environment will benefit traditional tech firms as demand returns, pricing power increases, and the non-AI earnings recession ends, the analysts said. “We believe that even as cloud AI winners will continue to deliver outsized growth and should be part of a tech portfolio, we think performance will come from traditional tech companies that were largely forgotten,” they added. “While investors gravitate toward exciting tech in search of standout returns, consider boring stocks in a normal recovery period given their solid long-term returns and the downside protection offered during volatile periods.” The bank also named TSMC and Samsung as dominant players with strong competitive positions that can weather uncertainty. — CNBC’s Michael Bloom contributed reporting.