Morgan Stanley calls AI panic a chance for selective investors. What's his advice?

Morgan Stanley strategists believe the excessive sell-off in stocks amid concerns around artificial intelligence is creating opportunities for "selective investors." The bank recommends looking for the next "AI market leaders" - fast-growing companies that could benefit from lower valuations and accelerating adoption of AI technology.

The market is now laying too negative a scenario for a number of industries, believing that incumbent players will not be able to adapt to the new technological AI wave, Morgan Stanley analysts are quoted by Bloomberg as saying. However, according to the bank's team, the market provides opportunities for a "selective approach to investment".

"In the short term, AI adoption is supporting the market, offsetting concerns about its long-term impact on individual industries and the market as a whole," Morgan Stanley strategist Andrew Pauker wrote.

Thus, in the software sector, which was among the most affected by the AI panic in February, the bank's analysts see an "attractive entry point" in the securities of Microsoft, Intuit and Atlassian. According to Morgan Stanley, artificial intelligence is not undermining the position of the big players, but expanding the potential enterprise software market. After the selloffs of early 2026, Microsoft shares have lost 17.9%, Intuit has collapsed 44.2% since the beginning of the year, and Atlassian securities have plunged 55.3% over the same period.

Morgan Stanley analysts also see opportunities for investors in the US banking sector. It, according to strategists, will be "a net beneficiary of AI implementation": artificial intelligence technology should eventually increase productivity and profitability of companies from this area. Among the most promising investments in the banking sector, analysts highlight Citigroup, whose shares have lost 3% since the beginning of the year, Bank of America, whose shares have fallen by 6.4%, State Street, whose shares have grown slightly since the beginning of the year (0.8%) and Truist Financial(plus 1.4% since the beginning of the year).

In the field of payments and financial technologies, the bank's strategists include Mastercard and Visa (their shares have lost 11.2% each since the beginning of the year) among the companies that could benefit most from the development of AI.

"What is happening now [in the market] is typical of a major investment cycle: the range of volatility tends to widen, and there are periodic moments when markets question both the pace of capital investment and which segments may be subject to shocks," Morgan Stanley concluded.

Investors continue to be concerned about the impact of AI on various areas of the market. For example, the collapse in the securities of software companies that began in February due to the update of Anthropic's Claude AI tool took just under $1 trillion of their capitalization within a week. Analysts called it a "software apocalypse". In addition, after the appearance of an AI-bot Hazel from the startup Altruist, which helps build a financial strategy and create financial documents, the shares of financial companies in the U.S., providing similar services, fell on February 11. Market participants also have doubts about the ability of bigtechs' multibillion-dollar investments in AI infrastructure to justify themselves, which also led to the collapse of major indexes in February: the Nasdaq at the beginning of the month experienced its strongest three-day collapse since April. Further alarming the market was the pessimistic forecast for 2028 published by research firm Citrini on Feb. 22. It said that unemployment in the U.S. could rise by 10% on the back of the AI boom and the gradual replacement of some office workers with AI tools.

This article was AI-translated and verified by a human editor