Morgan Stanley Investment Management (MSIM) identifies tokens as the core product of the AI industry, noting a shift from software licensing to token consumption. They project AI systems will be 250 times more powerful by 2028, with token consumption increasing tenfold in 2025 alone. This rapid growth is part of an "agentic transition" where AI moves from reactive to autonomous operations, demanding substantial investment. Since 2017, approximately $2.3 trillion has been committed to AI capital expenditures, and this pace is only accelerating, marking an unprecedented rate of compounding.
MSIM characterizes the AI landscape as a full-stack capital cycle, encompassing infrastructure, models, applications, robotics, and power, rather than just software or chips. Bottlenecks have moved from chips to power, memory, networking, and cooling, making these commodities scarce. The firm suggests that the next wave of value will come from AI usage, including inference, orchestration, applications, and workflows, offering more durable recurring revenue opportunities. They also note the emergence of new software moats, where vertical SaaS winners will control data, domain, and distribution.
AI is increasingly recognized as a geopolitical race, particularly between the US and China, elevating it to a matter of national security. MSIM observes that AI capabilities are advancing faster than governance, leaving private companies to make decisions with broad economic and geopolitical consequences. Despite the rapid developments, MSIM cautions that the biggest winners of AI may not yet exist, comparing the current phase to the initial infrastructure building of past technological revolutions, with applications and investment winners emerging later. They underline that the rapid pace of change makes it challenging for the average person and investors to keep up with the evolving industry.
