Morgan Stanley: AI Revolution Could Boost U.S. Stocks by 29%

Morgan Stanley has released a report detailing the potential impact of the AI revolution on the U.S. stock market and the labor force. The report suggests that advancements in autonomous decision-making AI and humanoid robots could significantly benefit enterprises, potentially adding 16 trillion dollars to the market value of U.S. stocks. This increase is equivalent to a 29% rise in the S&P 500 index. The report emphasizes that these predictions are based on two key assumptions: the continuous rapid advancement of AI capabilities and the widespread adoption of AI technologies by enterprises.

According to the report, the annual net income for large enterprises could increase by approximately 92 billion dollars. This growth is primarily driven by cost reductions, increased revenue, and workforce downsizing. The report estimates that autonomous decision-making AI could contribute around 49 billion dollars in value, while humanoid robots could add approximately 43 billion dollars. These advancements could collectively boost the adjusted pre-tax profits of the S&P 500 index by over 25%.

The report highlights that sectors such as consumer goods distribution, retail, real estate, and transportation are likely to experience the most significant value creation. Over the long term, these industries could see value creation that is at least double their expected pre-tax profits for 2026. The report also notes that enterprises are showing signs of a "tipping point" in AI adoption, suggesting that the market value creation from AI could exceed current high estimates if AI capabilities continue to advance at a non-linear rate.

While the stock market may experience a boom, the AI-driven value creation could pose challenges for the labor force. The report estimates that AI adoption could impact approximately 90% of existing jobs, necessitating skill upgrades or career transitions for many workers. However, the report also suggests that AI could create new roles such as "AI supply chain analysts" and "AI ethicists."

Historically, technological revolutions such as the internet boom have led to net job creation, despite periods of job displacement. The report emphasizes the importance of employee retraining in helping workers re-enter the labor market quickly. Other analysts have expressed more pessimistic views on AI's impact on the job market. For instance, some estimates suggest that AI could automate up to 300 million full-time jobs, with administrative and legal roles being the most at risk. Additionally, there are concerns that AI could displace half of all entry-level white-collar jobs within the next five years, potentially leading to a significant increase in unemployment rates.