Morgan Stanley Says AI Adoption Could Drive the Next Wave of Profit Growth

Companies that are successfully integrating artificial intelligence into their operations may be among the strongest performers this earnings season, according to Morgan Stanley (NYSE:MS) strategist Michael Wilson.

Wilson’s team believes AI adoption is beginning to improve corporate profitability, particularly for companies that can use the technology to lower costs, increase productivity or strengthen pricing power.

Morgan Stanley expects AI-related adoption to contribute around 100 basis points, or one percentage point, of net-margin expansion through 2027.

AI Users May Benefit More Than AI Infrastructure Providers

The first stage of the AI rally was largely driven by companies supplying the technology, including Nvidia, Alphabet and Meta Platforms.

The next stage may increasingly reward companies that use AI to improve their existing businesses.

Morgan Stanley said the outlook is becoming more attractive for companies where AI plays a central role in the investment case and where pricing power remains stable or strong.

This includes some sectors that investors have previously viewed as vulnerable to automation, such as transportation, software and professional services.

Rather than being replaced by AI, leading companies in these industries may use the technology to automate routine work, reduce operating expenses and improve service quality.

Morgan Stanley Identifies Potential AI Beneficiaries

Morgan Stanley’s analysis highlighted several companies that could benefit from greater AI adoption, including:

• Bank of America (NYSE:BAC)
• CVS Health (NYSE:CVS)
• NextEra Energy (NYSE:NEE)

The research also continues to favour established AI leaders such as Alphabet, Meta and Nvidia.

The list shows that potential AI beneficiaries are no longer limited to semiconductor and technology companies. Energy, banking, healthcare and industrial businesses may also generate measurable gains from AI implementation.

Investors are becoming more selective. Artificial intelligence remains one of the main themes supporting the US stock market, but investors are becoming more cautious about which companies are likely to produce real returns from the technology.

Concerns have increased that some of the largest technology companies are spending too aggressively on data centres, chips and other AI infrastructure.

At the same time, expectations for S&P 500 profit margins are already near their highest levels in more than a decade. This increases pressure on companies to prove that AI spending can translate into stronger earnings rather than simply higher expenses.

Semiconductor stocks have also recently faced pressure as investors question whether their valuations have risen too far.

Companies Are Reporting Measurable Productivity Gains

Morgan Stanley said AI adoption is moving from experimental projects toward measurable business value.

Around 40% of companies classified as AI adopters have reported at least one quantifiable benefit during the current earnings season. That compares with approximately 21% a year earlier.

Companies have also reported average net productivity improvements of nearly 10% over the past year.

The most visible gains have appeared in:

• Software development
• Customer service
• Finance
• Business operations

These improvements can support operating leverage, meaning revenue can grow faster than costs and produce stronger profit margins.

What This Means for Investors

The AI investment theme may be broadening beyond companies that manufacture chips or operate large cloud platforms.

Investors may increasingly focus on businesses that can demonstrate measurable improvements in productivity, costs and margins from AI adoption.

This could favour companies with large workforces, repetitive processes, extensive customer-service operations or significant amounts of internal data.

However, simply announcing an AI strategy may no longer be enough. Investors are likely to look for specific evidence that the technology is improving revenue growth, reducing expenses or increasing profit margins.

The strongest AI-related opportunities may therefore come from companies that can show clear financial benefits rather than those making the largest investments.