Morgan Stanley's Top 10 Predictions for 2026: AI Capability Divergence Intensifies, Tech Giants Accelerate Integration of Energy Facilities

Recently, Stephen C Byrd, the global thematic research head at Morgan Stanley, released the 2026 market outlook, proposing ten key predictions centered around four major themes: the diffusion of AI technology, the future of energy, a multipolar world, and social change, outlining the evolution path of the market driven by technology for investors. The investment bank expects that the leading large models in the United States will achieve a leap in capabilities in the first half of 2026, while competitors in other parts of the world will struggle to match this in the short term. At the same time, the exponential growth in computing power demand will outpace the speed of supply expansion, fundamentally changing the economics of data centers. Morgan Stanley emphasizes that thematic investing has proven to be a strong source of excess returns. In 2025, the bank's thematic stock portfolio outperformed the MSCI World Index by an average of 16 percentage points and the S&P 500 Index by 27 percentage points. The three best-performing categories are all driven by the dynamics of a multipolar world. These predictions cover multiple dimensions, including technology, energy, geopolitics, and the labor market, highlighting the profound impact of AI technology diffusion on the global economic structure and the resulting reshaping of national competitiveness. Prediction 1: Global AI Technology Development Shows a Divergent Pattern Morgan Stanley predicts that in the first half of 2026, the leading large models in the United States will achieve a leap in capabilities, while competitors in other regions will find it difficult to achieve similar breakthroughs within the same timeframe. This technological gap will create a "two worlds" pattern in AI development. At the application level, market sentiment will undergo a significant shift. Concerns about AI adoption rates in the first half of 2026 will turn into optimistic sentiment in the second half as AI capabilities grow non-linearly, with the benefits of AI applications becoming increasingly significant. Prediction 2: Exponential Growth in Computing Power Demand Outpaces Supply Capacity The widespread adoption of AI applications and the increasing complexity of usage scenarios will drive computing power demand to grow exponentially, while supply growth will struggle to keep pace. Morgan Stanley has introduced a new "smart factory" model to help investors understand the economic benefits of large model developers at the data center level. The report emphasizes that these economic benefits are attractive. Prediction 3: Trump Administration Launches Strong Policy Agenda Morgan Stanley predicts that the Trump administration will take stronger actions than expected, focusing on ensuring domestic supplies of critical minerals, uranium, and metals, supporting the return of manufacturing, increasing military spending while emphasizing innovation, and lowering consumer costs. Prediction 4: Pressure for AI Technology Transfer and National Self-Sufficiency In response to the aforementioned trends, the world will face pressure for AI technology transfer. The inequality of AI capabilities at the national level may affect trade dynamics. Countries' pursuit of national self-sufficiency and enhancing "domestic total intelligence" will become increasingly intense. Prediction 5: Rising Energy Costs Trigger Policy Backlash The rise in global energy costs will trigger a backlash against the growth of data centers, prompting the introduction of low-cost energy support policies and encouraging data center projects to adopt "off-grid" power supply strategies. This politicized issue will reshape the development path of data centers. Prediction 6: AI Giants Accelerate Integration of Energy Infrastructure Major AI companies will take measures to strengthen control over energy infrastructure, with goals including mastering their own destiny, obtaining the lowest cost and most reliable energy as soon as possible, shielding other electricity customers from the impacts of AI growth, and leveraging AI to drive improvements in energy and power efficiency. The integration of AI and energy will deepen significantly. Prediction Seven: Restructuring of the Global Manufacturing Landscape China will increase its share of the global manufacturing market in key technology-intensive industries. Meanwhile, as technology diffusion reduces the advantage of low-cost labor, the balance of U.S. manufacturing will tilt towards domestic production. Regions with high cost structures, strict regulations, and low levels of AI application will lose market share. Prediction Eight: Latin America Faces Triple Transformation Driving a New Investment Cycle Policy shifts, geopolitical changes, and peak interest rates will drive Latin America into a new investment cycle. This bull market will be driven by investment rather than consumption. Prediction Nine: Companies and Governments Launch Large-Scale Retraining Programs Companies and governments will introduce extensive retraining programs to address employment changes driven by AI. The political sensitivity to real or perceived unemployment issues caused by AI applications will trigger a series of policy interventions. Prediction Ten: Transformative AI Reshapes Economy and Asset Valuation Morgan Stanley predicts that by the second half of 2026, early signs of transformative AI driving rapid price declines across multiple sectors will emerge. This will further lead to increased wage inequality, higher capital expenditures, upward pressure risks on interest rates, and rising asset values that cannot be "replicated" by AI, reshaping the landscape of national competitiveness