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Major technology companies are expected to maintain their massive artificial intelligence (AI) investment plans despite a sharp post-election selloff in technology stocks, with Morgan Stanley retaining its forecast of USD 3.4 trillion in combined capital spending by major cloud companies in 2028 and 2029.
In a research article published on Wednesday, Morgan Stanley said the decline in AI-related stocks following the US midterm elections appeared to be an overreaction, adding that the broader investment cycle remained intact. The firm said further market volatility could create opportunities across AI infrastructure, software and companies adopting the technology. The election results are more likely to delay some data centre projects than derail the overall investment cycle, according to the report. Some projects scheduled for completion in 2028, particularly in Texas and Ohio, could be pushed to 2029 as incoming state administrations work with legislators to establish new requirements for developers. Morgan Stanley Research has shifted 20 per cent of its projected 2028 data centre capacity to 2029, while maintaining a positive view of the overall expansion. Its revised estimates indicate global data centre capacity growth of 9 per cent in 2028 and 20 per cent in 2029. The firm has retained its forecast for capital spending by hyperscalers, or major technology companies providing cloud computing and related services, at USD 1.6 trillion in 2028 and USD 1.8 trillion in 2029. The report said AI investments continue to offer an estimated return on invested capital of more than 30 per cent, providing an incentive for these companies to expand capacity and develop new products. "The election results are more likely to delay some data center projects from 2028 to 2029 than derail the broader capital investment cycle," Morgan Stanley Research said. However, financing for new data centre construction and specialised AI cloud providers could become more selective. The report said lenders and investors would increasingly assess tenant quality, access to reliable power and contractual protections. On investment opportunities, Morgan Stanley identified three areas: large cloud technology companies, selected data centre infrastructure and power suppliers, and software providers and businesses adopting AI. It also expects investment opportunities to broaden beyond semiconductor and infrastructure companies towards software and AI adopters, particularly in cybersecurity and infrastructure software. The firm said the shift in project timelines could allow a smoother balance between supply and demand across the data centre industry, while further market volatility could create opportunities for investors. (ANI)
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