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Morgan Stanley: AI applications will become a new engine for corporate profits, benefiting industries such as transportation and software

2026-07-27·newswire-us-stock-175144
Morgan Stanley: AI applications will become a new engine for corporate profits, benefiting industries such as transportation and software.

Morgan Stanley strategists said that as more and more U.S. companies integrate artificial intelligence (AI) into their operations, these companies are expected to achieve higher profit margins during this earnings season.

A team of Morgan Stanley strategists led by Michael Wilson said profit margin expectations "have improved most significantly" for companies that use AI as a core investment thesis and have neutral to strong pricing power.

Morgan Stanley predicts that by 2027, AI applications will drive a cumulative increase in corporate net profit margins of approximately 100 basis points. Wilson wrote in the report: "The prospects for AI application companies are becoming increasingly attractive.

This is particularly important because some industries usually considered vulnerable to the impact of AI - including transportation, software and services, and professional services - are now among the most attractive AI application groups." According to the team’s analysis, Bank of America, oilfield services company Halliburton, healthcare company CVS Health, and clean energy company NextEra Energy will be important beneficiaries of AI applications.

As for companies such as Google’s parent company Alphabet, Meta and Nvidia, which once led the first round of AI market, they still maintain high ratings in Wilson’s research system. AI is still the core theme driving the rise of U.S.

stocks, but the "Big Seven" technology companies that have led the market in the past few years have generally performed poorly this year. This is because investors are worried that large technology companies are investing too aggressively in AI, and the market has become more cautious about the real winners in the future.

Google's stock price fell sharply after it released its earnings report last week. Although its performance itself is still excellent, the company's capital expenditure plan is too large, coupled with the negative cash flow, making investors uneasy. Since the beginning of this year, the U.S.

stock market has been showing a pattern: technology giants that have invested heavily in AI have been punished, while semiconductor manufacturers have been sought after, especially the storage sector. However, semiconductor-related stocks have also been weak recently due to concerns about overvaluation.

During the second quarter earnings season, profitability has become the focus of the market. Analyst expectations for S&P 500 net profit margins are now at their highest level in more than a decade. This year, a portfolio of AI-enabled companies compiled by Bank of America (BofA) has outperformed hyperscale cloud players.

Wilson believes this trend is likely to continue as "AI applications move from the experimental stage to the stage where they can create measurable enterprise value." He pointed out that so far in the Q2 financial reporting season, about 40% of AI application companies have disclosed at least one quantifiable AI benefit, compared with only 21% a year ago.

Wilson also said that in the past year, the average productivity of enterprises has increased by nearly 10%, with the most obvious improvements in areas such as software development, customer service, finance and operations.

"We continue to believe that AI applications will be an important source of driving earnings growth and improving operating leverage," Wilson wrote.

#Stocks #Nvidia #Meta #Google #AI

Full text

Morgan Stanley: AI applications will become a new engine for corporate profits, benefiting industries such as transportation and software

Morgan Stanley strategists said that as more and more U.S. companies integrate artificial intelligence (AI) into their operations, these companies are expected to achieve higher profit margins during this earnings season. A team of Morgan Stanley strategists led by Michael Wilson said profit margin expectations "have improved most significantly" for companies that use AI as a core investment thesis and have neutral to strong pricing power. Morgan Stanley predicts that by 2027, AI applications will drive a cumulative increase in corporate net profit margins of approximately 100 basis points.

Morgan Stanley strategists said that as more and more U.S. companies integrate artificial intelligence (AI) into their operations, these companies are expected to achieve higher profit margins during this earnings season. A team of Morgan Stanley strategists led by Michael Wilson said profit margin expectations "have improved most significantly" for companies that use AI as a core investment thesis and have neutral to strong pricing power. Morgan Stanley predicts that by 2027, AI applications will drive a cumulative increase in corporate net profit margins of approximately 100 basis points. Wilson wrote in the report: "The prospects for AI application companies are becoming increasingly attractive. This is particularly important because some industries usually considered vulnerable to the impact of AI - including transportation, software and services, and professional services - are now among the most attractive AI application groups." According to the team’s analysis, Bank of America, oilfield services company Halliburton, healthcare company CVS Health, and clean energy company NextEra Energy will be important beneficiaries of AI applications. As for companies such as Google’s parent company Alphabet, Meta and Nvidia, which once led the first round of AI market, they still maintain high ratings in Wilson’s research system. AI is still the core theme driving the rise of U.S. stocks, but the "Big Seven" technology companies that have led the market in the past few years have generally performed poorly this year. This is because investors are worried that large technology companies are investing too aggressively in AI, and the market has become more cautious about the real winners in the future. Google's stock price fell sharply after it released its earnings report last week. Although its performance itself is still excellent, the company's capital expenditure plan is too large, coupled with the negative cash flow, making investors uneasy. Since the beginning of this year, the U.S. stock market has been showing a pattern: technology giants that have invested heavily in AI have been punished, while semiconductor manufacturers have been sought after, especially the storage sector. However, semiconductor-related stocks have also been weak recently due to concerns about overvaluation. During the second quarter earnings season, profitability has become the focus of the market. Analyst expectations for S&P 500 net profit margins are now at their highest level in more than a decade. This year, a portfolio of AI-enabled companies compiled by Bank of America (BofA) has outperformed hyperscale cloud players. Wilson believes this trend is likely to continue as "AI applications move from the experimental stage to the stage where they can create measurable enterprise value." He pointed out that so far in the Q2 financial reporting season, about 40% of AI application companies have disclosed at least one quantifiable AI benefit, compared with only 21% a year ago. Wilson also said that in the past year, the average productivity of enterprises has increased by nearly 10%, with the most obvious improvements in areas such as software development, customer service, finance and operations. "We continue to believe that AI applications will be an important source of driving earnings growth and improving operating leverage," Wilson wrote.

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