Morgan Stanley has identified several investment strategies to capitalise on the artificial intelligence boom, with a focus on companies demonstrating growing AI exposure and materiality. The investment bank’s preferred route involves targeting buy-rated stocks with attractive risk/reward profiles poised to deliver above-market returns from AI adoption. Their analysis considers a company’s AI exposure, the technology’s materiality to the investment case, and pricing power.
While the list includes global giants like S&P Global, EssilorLuxottica, and Siemens Energy, three ASX-listed companies have made the cut: Paladin Energy, Coles Group, and Endeavour Group. Paladin Energy, a uranium miner, is positioned to benefit from AI’s growing energy demands. Coles Group, a major Australian retailer, is integrating AI across various business functions, from smart trolleys to stock optimisation, supported by a partnership with Microsoft.
Endeavour Group’s inclusion is more surprising, given recent challenges and leadership changes. Endeavour Group is a retail and hospitality business that owns brands such as Dan Murphy’s and BWS. The company has faced activist investor activity and a share price decline. However, Endeavour has reportedly been leveraging AI to optimise pricing, promotions, staff rostering, and marketing, contributing to improved gross margins in its retail division.
Morgan Stanley’s analysis, which surveys 3600 global stocks every six months, reveals a growing trend of AI adoption in the Asia-Pacific region and among consumer durables and apparel companies. The survey suggests that the market is increasingly rewarding AI adoption, with companies demonstrating AI materiality experiencing positive impacts on relative price performance and earnings revisions. This highlights the intense investor interest in identifying the next wave of AI beneficiaries.
