Morgan Stanley outlines its top stock picks reported by CNBC, including Microsoft, Alphabet, Nvidia, Adobe, and others, that are well positioned to benefit from the growing $4 trillion market opportunity in generative artificial intelligence applications over the next three years.
Key Points
- Morgan Stanley projects 44% of labor will be impacted by AI in the next 3 years, representing a $4.1 trillion opportunity in reduced labor costs for companies.
- The firm sees software vendors poised to capture 5% of this total labor market impact through generative AI solutions, representing an estimated $150 billion increase in spending.
- Morgan Stanley’s top pick stocks positioned to benefit include Microsoft, Alphabet, Nvidia, Adobe, MongoDB and Five9. These companies supply key AI technologies or have business models well-aligned with generative AI automation.
- Nvidia is seen maintaining its dominant position in high-end GPUs critical for training many AI models. Alphabet could see EPS growth return to mid-teens as AI adoption increases on its cloud platform.
- Adobe’s creative software suite was highlighted as particularly well-suited to integrate generative AI functionality in a sticky way that helps monetize new productivity for users.
- While much early discussion focused on consumer opportunities, Morgan Stanley sees a more foundational opportunity for generative AI to broadly expand the scope of automatable enterprise software and business processes.
Key Insight
Morgan Stanley identifies a burgeoning $4 trillion market in generative artificial intelligence (AI) applications anticipated over the next three years, with software vendors like Microsoft, Alphabet, Nvidia, Adobe, MongoDB, and Five9 positioned to seize a significant portion of this market, especially in automating enterprise software and business processes which are highlighted as a foundational opportunity.
Why This Matters
The insight underscores the rapid adoption and the vast economic potential of generative AI technology, which is expected to disrupt labor markets and significantly reduce labor costs for companies. This trend, therefore, not only highlights the robust investment opportunity in top tech firms but also hints at a paradigm shift in how businesses could operate with enhanced automation and efficiency. The highlighted stocks are seen as the pioneers in this frontier, with products and services that are well-aligned with the demands of generative AI applications, positioning them favorably in this emerging market.
