“Clear signs” of above-benchmark returns are emerging in companies whose operations are significantly reliant on artificial intelligence, according to analysts at Morgan Stanley.
Some of the world’s biggest firms, including mega-cap tech groups like Google-owner Alphabet (NASDAQ:GOOGL) and Facebook-parent Meta Platforms (NASDAQ:META), have laid out plans this year for major investments in AI, as they look to harness and eventually monetize automation tools.
AI has since become a central driver of stock markets, with the meteoric rise in shares of cutting-edge chip designer Nvidia (NASDAQ:NVDA) just one example of the influence the technology has on investors.
In Morgan Stanley’s fouth survey mapping out the speed and breadth of AI adoption across the brokerage’s coverage universe, 259 stocks with a market capitalization of $8.7 trillion have made AI a “material factor” in their operations.
Companies who have been “disrupted” by the rise of AI have seen analysts negatively change their results predictions, while adopters of the nascent technology are leading the market with respect to earnings revisions, the Morgan Stanley analysts said.
They added that the signs of “AI materiality” have cropped up in relative price performance, with industrials, information technology and consumer discretionary names viewed as the “best positioned” to create “alpha” through higher pricing power. “Alpha” refers to a measure of performance that describes an investment’s ability to top the wider market.
Meanwhile, stocks which have increased their exposure to and use of AI have outperformed those that have decreased in these categories, the analysts’s research found.
Asia Pacific experienced the most sizable uptick in AI adoption since Morgan Stanley released its third survey, although indications of weakness in the pricing power of firms in the region.
Minor increases in AI adoption were seen in North America, with no net change in pricing power.
“As AI related companies shift from hype to execution, things may appear quieter in the region, but much is still going on below the surface,” the analysts wrote.
They outlined several stocks where so-called “AI materiality,” particularly those that have made the technology a “core” part of the business. Of these, Morgan Stanley had an “overweight” rating of e-commerce group Amazon (NASDAQ:AMZN), communication services firm Meitu, and industrials name Johnson Controls (NYSE:JCI) International. Information technology companies ASM International (AS:ASMI), SAP, Accton, VNET, and GDS Holdings (NASDAQ:GDS) were also listed by Morgan Stanley.
Source: Investing.com
