"Here Come Humanoids": Morgan Stanley Braces For The Looming Phase Shift in AI

By Katy Huberty and Adam Jonas of Morgan Stanley

A core strategy of Morgan Stanley Research is combining deep sector and macro expertise with a global footprint and collaborative culture to identify investment themes that help our clients generate alpha. Over the past 30 years, fewer than 3% of stocks drove the entire $80 trillion of global equity market expansion. These stocks tend to sit at the center of the most important investment themes. We expect our four key themes for 2025 – AI Diffusion, Longevity, Future of Energy, and Multipolar World – to regain their leadership positions and even accelerate as markets calm.

Clients often ask if the AI infrastructure investment that led the US equity market over the past two years will be sustainable when markets recover. We think it will be and that we’re still in the early innings of the AI infrastructure buildout. As AI-driven productivity takes hold, we expect the beneficiaries to broaden out. Our research has shown that every 10 years a new computing cycle emerges, with access to compute and thus the TAM increasing tenfold. Based on this pattern, $1 trillion of CPU-based compute for traditional software applications (the last cycle) implies $10 trillion for GPU-based compute deploying AI applications. This scenario appears to be playing out, with early-stage AI capex tracking at 10x early cloud capex.