Morgan Stanley bets on 2026 AI network equipment stocks: Cisco Systems, Inc. (CSCO.US) and Arista (ANET.US) could be the big winners.

Morgan Stanley predicts that multiple networking and telecommunications equipment companies will perform well in 2026 due to the continued development of artificial intelligence infrastructure. The firm stated that Cisco Systems, Inc. (CSCO.US) and Arista Networks, Inc. (ANET.US) have opportunities in 2026, mainly due to the expansion of Ethernet technology market share. They remain attractive in AI-related stocks, and their profit growth does not depend on price increases. "For Cisco Systems, Inc., we believe that opportunities from sovereign nations and optical operations may drive its stock price upward," Morgan Stanley analysts Meta Marshall and Mary Lenox wrote in a 2026 outlook report. "For Arista, we believe that recent market sentiment around its market share has become particularly pessimistic, but with the release of first-quarter earnings and the start of initial deployments, opportunities are becoming clearer, and this sentiment could potentially reverse." Morgan Stanley maintains a "buy" rating for Cisco Systems, Inc. and Arista. The firm raised Cisco Systems, Inc.'s target price from $82 to $91, but slightly lowered Arista's target price from $171 to $159. Marshall and Lenox noted, "Cisco Systems, Inc. has performed well, receiving $1.3 billion in orders and seeing strong demand from super-scale customers for optical devices used for data center interconnection and horizontal expansion. With the company now expecting AI business revenue to reach around $3 billion in the 2026 fiscal year, Cisco Systems, Inc.'s AI business has grown from representing about 2% of company revenue to nearly 5% within a few years, becoming an important driver of growth." Morgan Stanley also raised its rating for Motorola Solutions, Inc. (MSI) from "hold" to "buy," but slightly lowered its target price from $471 to $436. Motorola's stock price has fallen 20% this year, possibly due to concerns about the government shutdown. The shutdown lasted for 43 days and ended in mid-November, making it the longest in U.S. history. "We believe that the selling of Motorola Solutions, Inc. has exceeded the explainable range and see an attractive entry point as the company's valuation gap with the S&P 500 index has narrowed," Marshall and Lenox stated. Morgan Stanley also predicts that Corning Inc (GLW.US), Ciena (CIEN.US), Lumentum Holdings, Inc. (LITE.US), and Coherent (COHR.US) will outperform the market in 2026. "The reason being, lasers and optical components are key investment areas, with pricing particularly attractive for 800ZR, EML lasers, and other optical components," Marshall and Lenox stated. "We remain more cautious on whether this pricing can sustain throughout the year due to ample market participants investing in capacity, but if data points on AI capital expenditure continue to see significant upward revisions, our short-term expectations for optical companies will apply to the full year (as in 2025)." Morgan Stanley raised Corning Inc's target price from $82 to $98, Ciena's target price from $195 to $213, Lumentum's target price from $190 to $304, and Coherent's target price from $150 to $180.