AI-Driven Stock Market Gains Reach $16 Trillion Mark.

A study by Morgan Stanley analyst Stephen Byrd estimates that companies could gain $920 billion annually from artificial intelligence, driving most of the stock market's gains. Byrd's research suggests that AI could lead to net benefits from job automation and augmentation, as well as higher wages. The estimated total value of AI to stocks is $16 trillion.

A groundbreaking study by Morgan Stanley analyst Stephen Byrd suggests that artificial intelligence (AI) could unlock significant financial benefits for companies in the S&P 500. According to Byrd's research, AI adoption could generate annual net benefits totaling approximately $920 billion, equivalent to about 28% of the index's 2026 pretax earnings [1]. This substantial cost savings could translate into a $13 trillion to $16 trillion boost in market value for the S&P 500, representing nearly a quarter of today's entire market capitalization [2].

Byrd's analysis indicates that the economic value creation from AI will stem from a combination of cost cutting and new revenue generation. Cost savings are projected to come from reduced payroll expenses and automation of routine tasks, while new revenue and margin enhancements are expected as employees are freed up to focus on higher-value activities [1]. The report also highlights that while some jobs will be displaced, entirely new categories of roles, such as chief AI officers and AI governance specialists, are likely to emerge [2].

The study emphasizes that while the headline number is impressive, full adoption of AI is expected to take many years, with significant risks of companies not achieving full adoption levels [1]. Moreover, the impact of AI will vary across industries. Sectors such as consumer staples distribution and retail, real estate management, and transportation are among the most exposed, with potential AI-driven productivity benefits exceeding 100% of forecast 2026 earnings [1].

Investors should note that AI is no longer a speculative theme. The cost savings potential is so large that it could become one of the most powerful drivers of U.S. corporate earnings growth in the second half of this decade [1]. Companies adopting AI at scale are likely to benefit from potential cost-cutting savings to their workforce, lower expenses for tasks done by AI, and new sources of revenue and higher profit margins [2].

References:
[1] https://finance.yahoo.com/news/ai-revolution-cut-nearly-1-162933183.html
[2] https://www.thetimes.com/business-money/economics/article/ai-adoption-could-add-billions-to-s-and-p-500-says-morgan-stanley-lmvhrvmvf