How could the study on AI productivity gains affect Morgan Stanley?
Morgan Stanley may adjust investment advice based on AI productivity findings The study found that AI has significantly raised the market's estimate of software-engineering productivity, citing a permanent 32.6% increase between November 2022 and December 2025. This data suggests that firms making effective use of AI, such as online marketplaces like eBay, are poised for higher gains. As an investment bank, Morgan Stanley uses these market signals and productivity estimates to inform its investment recommendations and advise clients on where expected gains are being priced into the stock market.
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How it reaches Morgan Stanley
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A recent paper by Alex Blumenfeld at the University of California, Berkeley, and Jonathon Hazell at the London School of Economics examined the impact of generative artificial intelligence (AI) on productivity. The research noted that annual AI investment is approaching $1 trillion, but questioned whether firms using AI are achieving economy-wide gains in human resource efficiency. The study specifically looked at how AI is impacting software engineering.
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The study noted that investors increasingly price expected gains into the shares of firms best placed to profit from AI. As an investment bank, Morgan Stanley relies on these market signals and productivity data to adjust its investment recommendations for companies like eBay.
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The facts so far
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- Between November 2022 and December 2025, AI raised the market’s estimate of the present value of software-engineering productivity by the equivalent of a permanent 32.6% increase.livemint.com
- The researchers studied companies ranging from online marketplaces like eBay to travel platforms like Airbnb.livemint.com
- The researchers compared firms’ stock returns with an AI Index, with other factors constant.livemint.com
Why it matters
For Morgan Stanley, which operates as a major investment bank, the ability to accurately assess and predict productivity gains driven by AI is central to its advisory role. If the study's findings hold, it suggests that companies successfully integrating AI into their core software engineering functions are fundamentally more valuable than previously estimated, requiring a shift in investment focus.
This aligns with the broader trend noted in the reports that software is undergoing a revolution, with technology and tech-adjacent companies accounting for roughly 95% of the market capitalization of the world’s 10 largest businesses. The study highlights that software development is where the efficiency story is unfolding first, a trend that impacts the valuation of entire sectors.
What we don't know yet
- Will the 32.6% productivity increase estimate hold true across different industries?
- How quickly will official statistics catch up to the productivity boom suggested by stock prices and job ads?
What would change this answer
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Reporting
- livemint.comOct 11
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