Name: AI boom still early, bubble fears exaggerated: Morgan Stanley
Uploaded: 2025-11-19T03:14:45.197Z
Duration: 7 min 8 s
Description: Morgan Stanley co-president Dan Simkowitz says AI demand remains strong and we’re still early in the cycle. He downplayed bubble concerns, noting big U.S. tech firms have the balance sheets to fund major infrastructure build-outs and are poised to benefit from decades of growth.

Morgan Stanley co-president Dan Simkowitz says AI demand remains strong and we’re still early in the cycle. He downplayed bubble concerns, noting big U.S. tech firms have the balance sheets to fund major infrastructure build-outs and are poised to benefit from decades of growth.

New York

The release of Open AI's ChatGPT has accelerated the development of artificial intelligence and warnings about its impact on society.

Rise of AI

Morgan Stanley representatives assert that the artificial intelligence industry is still in its early stages, with demand and use cases continuing to develop. Large technology companies, including Amazon, Meta, Google, and NVIDIA, are investing heavily in AI infrastructure, often using significant portions of their cash flow and raising substantial debt to fund expansion.

The firm notes that while there are periods of market exuberance, current trends do not indicate a speculative bubble similar to past market busts. Additionally, both U.S. and Chinese technology companies are actively raising capital, with strong investor interest observed in Asia and globally. Morgan Stanley also addressed questions about its underwriting activities in China, emphasizing compliance with regulatory inquiries.

AI boom still early, bubble fears exaggerated: Morgan Stanley

I think A.I. is obviously a huge topic and it should be. It is revolutionary and transformational technology. And so I think on the demand side what companies like Morgan Stanley big companies like Morgan Stanley but all the way through the economy and in our personal lives the ability to use generative A.I. the L.L.M. and what we can do with that is going to change the economy. I think we are the demand case is still early inning. So I don't think we have a bubble in A.I. demand. I think we're in the very early stages of finding use cases and deploying it for productivity for customer satisfaction. So we're early there. I think what you will have in early days is something this transformational and this large. You're going to have sort of you know periods where it gets hyped up a little too much or not enough. I think the you're going to have some amazing winners in A.I. I think a number of those already exist. But I'm highly confident that some of the winners in deploying A.I. into both corporate and the personal and our personal life some of them haven't even been founded yet. And so I think we're still early days in the cycle. There's clearly going to be some infrastructure overbuilds and then you'll have catches up. But I think the other thing that is different this time is the very large cap technology companies with extraordinarily strong balance sheets. You know the names of the hyperscalers but also NVIDIA. They do have the capital and the wherewithal to finance a lot of this build here in the early days to take advantage of what we think is going to be decades of transformation in the economy. Dan I got to ask you right on this issue of funding that CapEx ramp which continues. Right. You've got names like Amazon. They're using up to I think 70 percent of the free cash flow right. Which is a lot of money right to fund CapEx. That's one and two. We're seeing examples or seal is one example here of a lot of these companies turning to debt to finance this CapEx ramp. Is this a concern. Should should investors be concerned. I think investors should be very discerning and do the work. But again the bulk of that debt is being raised by enormously successful companies. And so if you think about just in the last six weeks at Morgan Stanley we've helped raise over 100 billion dollars. The number is very large of debt capital to help build out AI largely infrastructure. But here's the companies are doing it. Meta Google or Alphabet Amazon and related companies. So these are very large cap entities that are help financing this. And then the other one obviously that has the wherewithal to be quite active in that market and not in the debt market but in the funding market is NVIDIA. You know again these companies are generating enormous cash flow. These large hyperscalers plus NVIDIA and some others and they're deploying that back into what we believe and they're seeing as a user is really transformational technology and tools. Dan I want to go upstream with this whole conversation to source not just rare earths which are obviously an issue between the US and China but but also gold. And Morgan underwrote a Chinese company a gold miner search in the house obviously not happy with that. And they're saying that look US investors stand to be hurt reputationally at the very least because of this. How are you thinking about this right now. What do you tell the public. Well right now we're in the process of responding to this house's request for information which is something we would definitely do. But you know our Asia business is important. So OK. And this is a company which which is on the entity list right. Because obviously some of their operations include labor from from from from Xinjiang from from the Uyghur population. Yeah. And as you know this was not an IPO related to the China business. So I think that's quite important to recognize. Fair enough. Back to the trade though. We've talked about the hyperscale. What about on the Chinese side and their need for global or foreign capital. Obviously a lot of state credit is going to be fire hosed on whatever startups are emerging. I think there's an explosion right now. But what about the opportunities for global capital. Well I think you saw throughout 25 really active capital markets for the large Chinese based technology companies. So Alibaba and Tencent and others raised real capital in the global capital markets. We were fortunate to be partners with them. They're doing that in both equity form convertible bonds in particular. We're very busy in Asia dating back to May all the way through the last few weeks. And so I think they've been active participants. I think what we're seeing you know this conference as an example has 3000 participants at it. I think we have sixteen hundred investors. We have five hundred companies. So there is real intense investor interest in Asia. It probably as great as we've ever seen. And so that is facilitating capital flow including both the large established Chinese technology companies but also some emerging technology players as well. And I think that's great that the entire sort of global capital market is working so efficiently at this time. Your question do you think because you've got such an inside line to some of these big Chinese names of the platforms you mentioned etc. Do you get the sense that they're going to be first to or Chinese names are going to be first to monetize and commercialize successfully. Well I think some of them are already doing that. But certainly OpenAI, Anthropic, Gemini, XAI just to pick four big U.S. models are all doing phenomenally well already. I mean if you think about commercialization the ramp for those four LLMs in the United States is pretty dramatic. But I do think whether it's LLMs that have come out of China already or will be developed they'll be there. But this commercialization right now on a global scale the U.S. players have also done extremely well. All right. So the softening we've seen in the tech trade the last week plus or so is just that a softening. We're not talking about the dotcom bust again. We're not talking about 1929. Oh not even close. OK not even close. I think again what we've seen over cycles over and over again is you'll have some levels where the exuberance goes a little bit too far and then you'll have a retracement and usually a healthy retracement. I would think that's sort of what we're in right now. You know our strategist came out this morning yesterday with his 26th view. It's based on fundamentals really strong S&P 500 earnings growth. The Fed in all likelihood cutting a couple of times out there deregulation out of the administration in various sectors. And then that drives some real fundamental capability. But at any moment in time you'll be above.

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AI boom still early, bubble fears exaggerated: Morgan Stanley

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