GenAI Revenue Forecast to Reach $1.1 Trillion by 2028: Morgan Stanley Research

Morgan Stanley Research predicts that revenue from generative AI could reach $1.1 trillion by 2028, a 20-fold increase from $45 billion in 2024. The expanding functionality of GenAI is expected to drive adoption and trigger a new technology cycle. Software and internet companies are expected to see a positive return on their AI investments as early as this year, with GenAI yielding a 34% contribution margin in 2025 and a 67% contribution margin by 2028.

The world of artificial intelligence (AI) is rapidly evolving, and one of the most exciting developments is the emergence of generative AI (GenAI). According to a recent report by Morgan Stanley Research, the revenue generated from GenAI is expected to surge, reaching an impressive $1.1 trillion by 2028 [1]. This represents a remarkable 20-fold increase from the $45 billion generated in 2024.

GenAI's expanding functionality is driving this growth. As software and internet companies begin to adopt these solutions, they are expected to see a positive return on their investments as early as this year. In fact, Morgan Stanley predicts that GenAI will yield a 34% contribution margin in 2025, increasing to a staggering 67% by 2028 [1].

The potential revenue opportunities for GenAI are vast. Corporate spending on software focused on productivity improvements from automation is expected to generate $400 billion of the $1.1 trillion revenue opportunity [1]. Consumer platforms, including ecommerce, search, social media, autonomous, and wearables, are expected to generate an additional $680 billion [1].

GenAI's impact on productivity gains is significant. Morgan Stanley took a closer look at the labor and wage calculations that GenAI can impact and found that this is where productivity gains come from [1]. For the first time, return on investment (ROI) is expected to be positive, with analysts anticipating that GenAI will yield a 34% contribution margin in 2025 [1].

GenAI's journey to mainstream adoption began in November 2022 with the release of ChatGPT and the first wave of commercially targeted products in the fall of 2023 [1]. Although there was initial uncertainty about the technology's potential to offer a return, the development of more robust infrastructure and the mainstream pickup of GenAI products have provided greater visibility into the potential for revenue and profits [1].

In conclusion, Morgan Stanley's predictions of the revenue potential of generative AI are a testament to the transformative impact of this technology on the software and internet industries. As GenAI continues to evolve and gain widespread adoption, it is expected to drive significant revenue growth and trigger a new technology cycle.

References:
[1] Morgan Stanley. (2023, March 15). GenAI Revenue Growth and Profitability. https://www.morganstanley.com/insights/articles/genai-revenue-growth-and-profitability