Morgan Stanley Suggests Buys on Ambarella (AMBA), Nvidia (NVDA), Western Digital (WDC)

If there's one good thing you can say about this whole coronavirus mess—and it takes a lot of reaching to find the silver lining in this rolling disaster cloud—it's that it's provided a new buy-in point for at least some stocks. In fact, Morgan Stanley, via analyst Joseph Moore, brought out a list of three stocks that it's looking at in particular on the chip-building front, though why it's looking at each is important to note.

Ambarella Taking It On the Chin

The first recommendation in the stack is Ambarella NASDAQ: AMBA, currently trading off its highs for the day, but well above yesterday's close of $39.43 at $41.08 as of this writing.

Morgan Stanley's notes on Ambarella suggest that the market has punished Ambarella unfairly. Even in a worst-case scenario around the ongoing troubles posed by the COVID-19 coronavirus, it notes, Ambarella still shouldn't be doing this badly.

Given that its shares are down a little less than half just since February, that's not so far out of line. It closed at $72.57 back on February 12, and it's a safe bet that the stock's fundamentals haven't changed that markedly in the space of six weeks to justify a nearly 50 percent loss in value.

Looking for Value? Consider Western Digital.

A similar story can be found at Western Digital NASDAQ: WDC, which Moore noted offers “...the most upside” in terms of a potential wide-ranging recovery. It's down off its highs for the day so far—it hit $43 as the market opened, but dropped to $40.34 as of this writing, still up from its previous close of $39.11—but holding onto at least some gains.

For much of the last year, Western Digital has been trading in a fairly reliable band between $50 and $70, though it's dipped into the $40s every so often, spending even a brief period in June 2019 in the upper $30s. A general recovery in stock prices could get it back in that band, which would mean a healthy upside at current prices.

Nvidia Flexing its Muscle

Last on the list is Nvidia NASDAQ: NVDA, and not because it has the weakest case, either. Nvidia kicked off the day at $230.51, and though it lost some of those gains to trade at $227.16 as of this writing, that's still a long way from its previous session close at $216.31.

Nvidia has made several exciting moves within its own market space, Moore noted, that make it an attractive property. Not only is it stepping up its work in data centers, but it's also building out new artificial intelligence (AI) applications that are proving exciting. It's also not ignoring the consumer market in favor of these new developments and is set to roll out new products this year.

Nvidia stock has been on an upward trajectory over the last 12 months, only recently reversing some of its gains. This time last year, it was trading at $168.62, which is a far cry from even its opening today at  $230.51. It took on some fresh gains, and gave some of them back, trading at $229.59 as of this writing. Even that is appreciably off its close yesterday of $216.31.

There's a Lot to Like in Chips Right Now

Moore summed things up best by noting that “indiscriminate selling” was likely to generate opportunities once the initial panic that prompted all that indiscriminate selling died down. While that might take some time yet—Moore noted that stocks haven't dropped far enough yet to suggest an overweight position thanks to ongoing issues in the supply chain—when that time does arrive, it could be a big deal.

With reports suggesting that China is getting back to work—recent word suggests that China's Apple Store locations are actually open again—it does suggest something of a light at the end of the tunnel. Don't forget the upcoming technology releases like new Apple NASDAQ: AAPL devices and the new console releases from Microsoft NASDAQ: MSFT and Sony NYSE: SNE still likely to hit by the end of the year. Though with events being canceled left and right out of the new buzzword of the day “an abundance of caution”, there could be some hiccups along that particular way.

But with people engaging further in social isolation, and turning to their devices of choice for work and play, chip makers may well stand to reap a windfall here if properly executed. That should make chip makers like Ambarella, Western Digital and Nvidia attractive in the weeks ahead.