Morgan Stanley Sees $1.4 Trillion AI Bet Paying Off for Tech Giants

Investment bank Morgan Stanley believes that tech giants Amazon (AMZN), Alphabet (GOOGL), and Microsoft (MSFT) will see strong long-term profits despite heavy spending on AI. The major cloud companies are expected to invest around $1.4 trillion in capital projects, with a significant portion going towards AI chips and data centers.

According to four-star analyst Brian Nowak, these investments could produce returns on invested capital of 25% to 50%. Morgan Stanley estimates that renting out AI computing power to customers through GPU rentals could generate operating margins of 60% to 70%, with returns on invested capital between 25% and 40%.

The bank also believes that selling access to AI models through application programming interfaces (APIs) could generate returns above 40%. However, the success of these efforts depends on how much companies can charge for using AI and how efficiently their chips can handle each request.