Morgan Stanley warns of AI disruption wave

Morgan Stanley is warning clients that AI models are reaching a point of rapid self-improvement, which could lead to exponential growth in their capabilities and further market disruption by mid-2026. They predict this will be felt acutely in the spring. The firm advises investors to focus on AI infrastructure companies and assets that AI can't replace. These include energy, metals, communication infrastructure, proprietary data firms, and even luxury resorts. This looming disruption has already begun affecting European equities, with the perceived risk jumping from 4% to 24% of the MSCI Europe index in a single month. This mirrors the early days of the COVID-19 pandemic when risks quickly spread across sectors. Morgan Stanley estimates that nearly $3 trillion in AI-related infrastructure investment will flow through the global economy by 2028, with the majority of that spending still to come. They also note that while 21% of S&P 500 companies mention AI benefits, the market is rewarding those who can demonstrate tangible results and monetization.