The bogus intelligence (AI) revolution is rewriting the principles of the American economic system, however reasonably than ushering in a golden age of client prosperity, it’s sparking a large, resource-heavy infrastructure increase that would depart the on a regular basis employee behind.
In response to a newly launched strategic report from Morgan Stanley Wealth Administration, the market has entered a “GenAI-capex-powered” period that represents a uncommon shift away from consumption-led progress and towards an investment-led “reindustrialization renaissance.” The catch is it’s very in contrast to earlier technological revolutions—such because the web, private computer systems, or cell gadgets.
The present generative AI (GenAI) wave is “not obviously consumer-centric yet,” in keeping with Lisa Shalett, chief funding officer for Morgan Stanley Wealth Administration. As an alternative, the build-out is deeply rooted within the bodily world to help large computing wants.
Shalett’s staff famous data-center-related funding already accounted for a staggering 25% of annual GDP progress in 2025, and is increasing at a tempo that’s multiples of forecasted actual GDP progress. This immense scale requires trillions of {dollars} of funding that may ripple by bodily markets, immediately impacting actual property, development, energy and electrical energy era, and industrial metals. The agency argues this dynamic is catalyzing a multiyear interval during which “investment dominates consumption as the growth driver amid economic rebalancing.”
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Whereas this infrastructure build-out is a boon for industrial metrics, the outlook for people is markedly much less rosy. Morgan Stanley warns of “transformational risks to the labor market” introduced on by the GenAI diffusion.
The report describes prospects for the U.S. client as finally “unremarkable,” weighed down by “depressed sentiment, job anxiety, a low 3.6% savings rate, and rising indebtedness and credit delinquencies.” Moreover, the agency predicts consumption progress will seemingly stall because of a lackluster job market, getting older demographics, and sluggish inhabitants progress, leaving the populace trapped inside “K-shaped economic dynamics” that exacerbate inequality, referencing the meme during the last 5 years that leaped from finance Twitter and into actuality, with the rich and dealing class representing branching strains on the “K,” reasonably than a “V-shaped” or “U-shaped” monetary restoration.
Apparently, this new paradigm can be forcing a harsh actuality verify on tech titans. For years, U.S. indexes have been dominated by “asset-lite, recurring-revenue tech business models” that loved near-zero marginal prices and ever-expanding margins. Nonetheless, the GenAI revolution is essentially totally different. It’s a “cash-hungry R&D arms race” with marginal-cost economics, which means as tech firms add subscribers, they have to concurrently spend vastly extra on valuable “compute” capability.
Consequently, these former asset-lite darlings are remodeling into “capital-intensive, cash-flow-hungry businesses.” Morgan Stanley bluntly states that for these hyper-scalers, “the era of multiple expansion based on seemingly ever-expanding profit margins is likely over.”
Financial institution of America Analysis chief fairness strategist Savita Subramanian has sounded related alarms about tech’s transfer away from an asset-lite mannequin, whereas Silicon Valley executives are waking as much as the actual fact AI could have ended the tech business’s income gravy practice, and even automated most coding work.
In the end, Morgan Stanley’s imaginative and prescient of 2026 and past is one in all profound financial realignment. The GenAI revolution might not be delivering a client utopia, however it’s fueling a worldwide, capex-driven infrastructure increase. It’s an period during which heavy equipment, energy grids, and information facilities reign supreme, essentially suggesting that, not less than for now, the AI increase is much better for computer systems than it’s for people.
For this story, Fortune journalists used generative AI as a analysis software. An editor verified the accuracy of the data earlier than publishing.
