AI could ultimately be a $16 trillion gift to the stock market.
That’s according to strategists at Morgan Stanley, who see the productivity gains and cost-cutting spree stemming from artificial intelligence adding as $13 to $16 trillion in value for the S&P 500.
At the high end of Morgan Stanley’s estimates, that implies the benchmark index adding another 29% to its market cap.
The bank’s predictions, which aren’t tied to a concrete timeline, assume that AI’s capabilities will continue to “improve rapidly” and that companies will adopt AI on a widespread level, strategists wrote in a note to clients over the weekend.
On a year-to-year basis, that could add around $920 billion in net benefits for large-cap firms, largely due to companies reducing headcount, lowering costs, and helping generate new revenue.
Agentic AI, or AI that can make decisions and act with less supervision than generative AI, could account for around $490 billion of that value, while embodied AI, or humanoid robots, could account for around $430 billion, the strategists estimated. Together, those forces could increase value for S&P 500 by more than 25% of adjusted pre-tax income, per Morgan Stanley’s analysis.
Morgan Stanley Research
The bank added that value creation could be most pronounced for companies in sectors like consumer staples distribution, retail, real estate, and transportation. Over the long term, strategists estimated that value creation in all three of those sectors could be at least double what companies are expected to make in pre-tax income in 2026.
According to the bank’s AI mapping research, corporations are showing signs of “an inflection” when it comes to adopting artificial intelligence, the note added.
“This degree of market value creation assumes full adoption, which will take place over many years, with time frame varying by company and industry,” strategists wrote. “If AI capabilities continue to improve at a non-linear rate, the magnitude of value creation from AI adoption will rise above our already high estimates.”
Job market impact
While the stock market could boom, AI-driven value creation could spell trouble for human workers, some of whom may need to upskill or change occupations, the bank said.
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Strategists estimated that AI adoption could impact around 90% of existing jobs, but create new roles, like “AI supply chain analyst” and “AI ethicist.”
“If history is any guide, AI could result in net job creation, though there could still be periods of displacement,” the bank said, pointing to job displacement from prior technological revolutions, like the internet boom. “The ability of employees to be re-skilled will be important for how quickly they can be absorbed back into the labor force.”
Other forecasters have voiced more dystopian views on how AI could reshape the job market.
In 2023, Goldman Sachs estimated that AI could automate around 300 million full-time jobs, with roles in the administrative and legal industries being most at-risk.
Antropic’s CEO, Dario Amodei, said he believes AI could eliminate half of entry-level white-collar jobs over the next five years, which he speculated could cause the unemployment rate to spike as high as 20%.