Morgan Stanley has released a research note indicating that the recent share price strength of Contemporary Amperex Technology Co., Ltd. (CATL) (ASX: 03750) is primarily benefiting from a rotation of funds away from crowded AI-related stocks and into quality laggards.

The bank noted that earlier this year, when market capital was heavily concentrated in AI-related names, recognition of CATL's fundamental strengths was relatively low. As investors now seek to diversify their AI holdings, Morgan Stanley has reiterated its "Overweight" rating on the stock, with an H-share price target of HK$815.

Morgan Stanley maintains that CATL's fundamentals remain robust. The company's upcoming second-quarter results are anticipated to surpass both its own guidance and the bank's forecasts. The firm is optimistic about CATL's growth prospects for next year, citing multiple catalysts including the electrification of diesel vehicles, a super-cycle in Energy Storage Systems (ESS), and the product cycle for sodium-ion batteries.

Current forecasts project CATL's earnings per share for 2026 to 2028 at RMB 20.53, RMB 27.78, and RMB 34.15, respectively. Revenue is expected to reach RMB 584 billion, RMB 750.4 billion, and RMB 899.2 billion for those years.