Summary: Morgan Stanley suggests that investors shift their focus to the adopters of artificial intelligence (AI) in 2024. While companies enabling AI dominated the market in 2023, the investment bank anticipates that adopters will play a critical role in the success of AI enablers this year. By leveraging AI investments, Morgan Stanley estimates an additional $3 trillion in spending on enabler hardware and software, accounting for 39% of the adopters’ estimated revenues. Some of the top picks in Morgan Stanley’s adopter list include JPMorgan Chase and Wells Fargo from the banking sector, American Express, UnitedHealth Group, and oil companies Baker Hughes and Schlumberger NV.
As the year 2024 unfolds, Morgan Stanley’s equity strategist Edward Stanley advises investors to focus on the adopters of artificial intelligence (AI). While companies enabling the use of AI experienced significant market growth in 2023, the investment bank predicts that adopters will take center stage this year.
The enablers, including chipmaker Nvidia and tech giants Alphabet and Microsoft, dominated the market last year, contributing over $6 trillion in market capitalization. However, Stanley emphasizes that the success of enablers depends heavily on the adopters’ active integration of AI technology.
Morgan Stanley’s analysis suggests that raising leverage on AI investments to two times net debt-to-EBITDA could lead to an additional $3 trillion in spending on enabler hardware and software, accounting for 39% of the adopters’ estimated revenues. This highlights the crucial role adopters play in realizing the full potential of AI solutions.
Among Morgan Stanley’s top adopter picks are banking and financial services stocks. JPMorgan Chase and Wells Fargo have shown strong commitment to leveraging AI. JPMorgan has allocated more than half of its $15.3 billion technology budget to “change the bank” initiatives, while Wells Fargo collaborates with Google on a virtual assistant powered by cloud conversational AI technology.
In addition to the financial sector, American Express is also expected to benefit from AI adoption. The company has already integrated AI and machine learning to provide real-time credit decisions and enhance fraud detection. UnitedHealth Group, in the healthcare industry, is utilizing AI capabilities to offer medical insights and improve operational efficiency.
Furthermore, energy companies Baker Hughes and Schlumberger NV have partnered with AI-focused firms to implement AI solutions in oilfield operations. This integration aims to drive operational efficiencies and optimize oil production.
Lastly, Morgan Stanley acknowledges The Trade Desk and Sony Group as notable adopters of AI. While their specific initiatives are not detailed, these companies are recognized for their intention to harness the power of AI in their respective industries.
In conclusion, Morgan Stanley urges investors to shift their attention towards the adopters of AI in 2024, recognizing their pivotal role in driving the success of AI enablers. By strategically leveraging AI investments, adopters can unlock significant growth opportunities and fuel the progression of AI technology across various sectors.