Which Stocks Are the Most Attractive to Buy in 2026, according to Morgan Stanley?

Morgan Stanley highlighted several stocks that the bank considers best positioned for 2026. The Wall Street investment bank lists companies such as Nvidia among its top ideas for the coming year. Other names with an “overweight” rating include Western Digital, Spotify, and Palo Alto Networks.

Spotify
Spotify is operating “at full throttle,” according to Morgan Stanley. Analyst Benjamin Swinburn notes that the audio streaming and podcast platform uniquely combines the use of artificial intelligence with potential for further growth. “We believe the AI risk for music labels is already priced in, and there is an opportunity for AI to be viewed as a positive factor,” he adds.

Swinburn also points out that Spotify has multiple tools to expand margins, including pricing power. “While we expect the company to absorb increases in minimum content costs per subscriber in 2026—likely starting in January and at least for agreements with Warner Music Group—we believe it can generate sufficient growth in average revenue per user and leverage other factors to meet our and consensus expectations for gross margin improvement.” Spotify shares have risen around 30% in 2025.

Palo Alto Networks
Analyst Meta Marshal identifies the cybersecurity company as one of the top picks for 2026. Morgan Stanley recently raised the stock’s target price to $245 from $228, noting that at current levels, the valuation is too attractive to ignore. Marshal likes Palo Alto’s growth prospects and remains optimistic about the CyberArk acquisition, which is still pending.

“We made PANW our top pick back in September because we saw the company as best positioned to benefit from platform and AI trends, particularly given its valuation—and that remains true,” she says. The stock has risen about 3.6% in 2025. “We continue to like the stock heading into 2026, believing there is significant potential for stronger performance as the year’s second half will be stronger, acquisitions will close and integrate, and AI will become an increasingly powerful driver,” she adds.

Western Digital
The data storage drive manufacturer is also showing strong momentum, according to Morgan Stanley. Analyst Eric Wudring notes that several key catalysts lie ahead, including the Innovation Bazaar event, Investor Day, and quarterly earnings reports early next year.

“The HDD segment remains one of the healthiest end markets we cover in our tech hardware universe—customer demand is gradually improving,” Wudring writes. The bank also raised the stock’s target price to $228 from $188, highlighting the company’s strong exposure to cloud infrastructure spending. “WDC remains our top pick and the most compelling combination of end-market strength, pricing power, and near-term catalysts.” Western Digital shares have risen more than fourfold in 2025, gaining over 300%.

Nvidia
“Nvidia remains the core of the AI theme, and at a relatively moderate valuation, it is difficult to find an alternative in the artificial intelligence sector. The company continues to perform at an extremely high level, sequentially increasing revenue by $10 billion in October (around $3 billion above estimates) and targeting another $8 billion growth in January. With hundreds of billions in demand yet to be served, we expect the shares to continue rising as AI sentiment normalizes,” the bank notes.

In summary, Morgan Stanley is betting on a combination of strong fundamentals, structural trends in AI and cloud spending, and specific catalysts that analysts believe can support the performance of these stocks in 2026.