Morgan Stanley says this may be one of the 2 best AI stocks to buy right now

Morgan Stanley ( MS ) suggested last month that it expects Visa ( V ) and MasterCard ( MA ) to benefit from AI. However, a prominent research firm recently warned that credit card networks could be replaced by stablecoins. In addition, the values ​​of V and MA are not particularly low, while their technical outlook is weak.

Based in San Francisco and Purchase, NY, respectively, Visa and MasterCard operate networks that help process credit card transactions globally. Visa’s market capitalization is $581.8 billion, while MasterCard’s market capitalization is $464.6 billion. MA’s forward price-earnings ratio is 26.68 times, while V is weighted with forward P/E ratio of 24.93.

In Visa’s first quarter that ended in December, its revenue rose 15% to $10.9 billion from the same period last year, while its net income, including certain items, grew 12% year-over-year (YOY) to $6.1 billion. As for MasterCard, its revenue in Q4 rose 18% YOY to $8.8 billion, while its bottom line rose 17% YOY, excluding currency fluctuations, to $4.1 billion.

Morgan Stanley indicated that MasterCard and Visa could benefit from increased use of AI because of the high value of their “tokenization and consent-based authentication” offerings.

According to a Capital One (COF) white paper, “Tokenization replaces sensitive data, such as personally identifiable information (PII), with anonymous tokens that provide no value to bad actors. Capital One also referred to “zero-trust strategies that require constant authentication and authorization.”

Both MasterCard and Visa say they offer tokenization. Last September, Visa reported that it was “testing (software systems) that enable targeted payments and consent-based authentication for agent transactions,” while MasterCard offers an “Authentication Satisfaction Service … to manage the consumer satisfaction lifecycle.”

Since AI can and has already been hacked, it is highly likely that, according to Morgan Stanley’s theory, the proliferation of AI agents will significantly increase demand for the products and authentication products provided by Visa and MasterCard. And the revenue provided by these offerings can ultimately improve the financial results of both companies.

Notably, Mastercard, along with Banco Santander ( SAN ) recently executed what it calls the first payment in Europe using an AI agent, while Visa has been rated by a third party as the best adopter of AI among payment companies.

According to research firm Citrini, in the coming year, AI agents will widely use SteelCoin instead of credit cards. Calling credit card fees “an obvious target” for AI agents looking for lower costs, Saturni reported that Stablecoin charges less than $0.01 per transaction, versus the 2%-3% fees charged by cards.

Average analyst estimates call for MA and V’s earnings per share to grow 14% and 12%, respectively, this year. Based on these growth rates, the companies’ P/E ratios are not particularly compelling right now.

As of the date of publication, Larry Ramer had no positions (either directly or indirectly) in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. This article was originally published on Barchart.com