AI could ultimately be a $16 trillion gift to the stock market.
This sees increased productivity and cost savings stemming from the addition of the S&P 500's value of $13 to $16 trillion, according to a strategist at Morgan Stanley.
At the high end of Morgan Stanley's estimate, this means that the benchmark index adds an additional 29% to its market capitalization.
Bank forecasts that are not tied to specific timelines assume that AI capabilities will “immediately improve” and that companies will adopt AI at a wide range of levels.
Year-on-year, it could potentially add about $920 billion in net profit to large companies, primarily as businesses helped them cut staff, cut costs and generate new revenue.
Agent AI, or AI that can act with less supervision than the AI that occurs, can account for around $490 billion of its value, while strategists estimated that embodied AI or humanoid robots could account for around $430 billion. Together, these forces can increase the value of the S&P 500, which is more than 25% of adjusted pre-tax revenue, according to an analysis by Morgan Stanley.
According to an analysis by Morgan Stanley, agents and embodied AI can increase value creation by more than 25% as a percentage of adjusted pre-tax income Morgan Stanley's Study
The bank added that value creation is most prominent for companies in the sector, such as distribution, retail, real estate and transportation of consumer staples. Over the long term, strategists estimated that value creation for all three sectors could at least double what companies would expect in 2026 in pre-tax revenue.
The bank's AI mapping survey shows that companies have shown signs of “inflection” when it comes to adopting artificial intelligence, the memo added.
“Creating this level of market value envisions full adoption over many years, with time frames varying between companies and industries,” the strategist writes. “As AI capabilities continue to improve at nonlinear rates, the magnitude of value creation through AI adoption will rise above already high estimates.”
The impact of the job market
The stock market can be booming, but AI-driven value creation can spell trouble for human workers. Some of them may need to improve their occupations or change their occupations, the bank said.
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The strategists estimated that AI recruitment could affect roughly 90% of existing employment, but created new roles such as “AI Supply Chain Analyst” and “AI Ethicist.”
“If history is a guide, AI could lead to the creation of net employment, but there could still be periods of displacement,” the bank said, pointing to the move of employment from previous technological revolutions such as the internet boom. “The ability of employees to be reskilled is important about how quickly they are absorbed into the workforce.”
Other forecasters have expressed more dystopian views on how AI can restructure the job market.
In 2023, Goldman Sachs estimates that AI can automate approximately 300 million full-time jobs, with the role of the management and legal industry at the most risk.
Antropic CEO Dario Amodei said he believes AI can eliminate half of the entry-level white-collar work over the next five years.
