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Demand for computing capacity is expected to significantly outstrip supply for years to come, while the increasing likelihood of AI policy interventions in both the US and China could further deepen the bifurcation of the global AI market, according to a Morgan Stanley report.
Noting the sharp decline in AI infrastructure stocks in recent weeks, Morgan Stanley believes much of the weakness is due to market and technical factors rather than a deterioration in fundamentals. "To be clear, we believe a meaningful driver of weakness has been technical rather than fundamental," it noted. It further noted, while enterprise limits on token spending are unlikely to materially constrain AI revenue. Morgan Stanley highlighted, companies may impose limits on employees' use of computing resources, as seen in a few high-profile cases. However, the data suggests this is unlikely to be a significant problem. As per the report, the median monthly token spending by enterprise users is currently very low, below USD 11. At the same time, the economics of AI use remain highly attractive, with AI potentially delivering around USD 55 in labour cost savings for every USD 2-3 spent on tokens. "Enterprise failure to adopt the most advantageous AI capabilities will lead to large competitive disadvantages, a dynamic we expect to become increasingly clear over time," it noted. Morgan Stanley however flagged, "Chinese open-weight models may become a greater competitive threat to American frontier LLMs, which in turn could drive lower spend on compute to train LLMs." It further noted that both large language models (LLMs) and more efficient models generate strong returns on the underlying AI infrastructure. At the same time, Enterprise AI use cases are also highly cost-effective, with token costs accounting for only a small fraction of the benefits generated. "We see an increasing probability of both US and Chinese AI policy intervention, which could lead to a greater bifurcation of the global market," it said. (ANI)
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