AI could create nearly $1T in annual value for S&P 500 companies – MS

[artificial intelligence Digital transformation change management, internet of things. man using computer and holding virtual ai diagram in concept of smart industry and Ai technology]
cherdchai chawienghong/iStock via Getty Images

Morgan Stanley’s analysts believe that artificial intelligence adoption could create approximately $920B in long-term economic value annually for S&P 500 (SP500 [https://seekingalpha.com/symbol/SP500]) companies, representing about 28% of their expected 2026 pretax earnings.

The total potential value creation from AI adoption “could unlock entirely new sources of growth, productivity, and innovation across sectors,” said Stephen C. Byrd, Morgan Stanley's global head of Sustainability Research.

The potential impact is nearly evenly split between two forms of AI, with agentic AI projected to deliver about $490B in annual value, equal to roughly 15% of the S&P 500’s (SP500 [https://seekingalpha.com/symbol/SP500]) consensus 2026 pretax income.

This estimate is net of implementation costs, which Morgan Stanley’s analysis pegs at about 5% of customer benefit. Agentic AI, which refers to AI software capable of performing various virtual tasks, is “likely to affect a broader range of occupations than embodied AI,” Byrd said.

Embodied AI, focusing primarily on AI-enhanced humanoid robotics (ROBO [https://seekingalpha.com/symbol/ROBO]), (BOTZ [https://seekingalpha.com/symbol/BOTZ]), (BATS:ARKQ [https://seekingalpha.com/symbol/ARKQ]), could generate approximately $430B in annual economic value for S&P 500 (SP500 [https://seekingalpha.com/symbol/SP500]) companies, representing about 13% of projected 2026 pretax income. This type of AI appears to “impact a narrower set of occupations, but with a higher likelihood of automation and job displacement where it does apply.” The analysis estimates the cost to deploy these AI-enhanced robots at approximately $5 per hour.

Several sectors show extraordinary potential for AI-driven value creation, with consumer staples (XLP [https://seekingalpha.com/symbol/XLP]), distribution and retail (XRT [https://seekingalpha.com/symbol/XRT]), (RTH [https://seekingalpha.com/symbol/RTH]), (IBUY [https://seekingalpha.com/symbol/IBUY]), real estate management and development (RWO [https://seekingalpha.com/symbol/RWO]), (IFGL [https://seekingalpha.com/symbol/IFGL]), (IYR [https://seekingalpha.com/symbol/IYR]), and transportation (XTN [https://seekingalpha.com/symbol/XTN]), (IYT [https://seekingalpha.com/symbol/IYT]), (FTXR [https://seekingalpha.com/symbol/FTXR]) all showing potential savings above 100% of their 2026 consensus pretax earnings.

Findings also reveal that “many sectors have potential savings (pretax, net of indicative implementation costs) above 50% of 2026 consensus pretax earnings,” while technology hardware and equipment (XLK [https://seekingalpha.com/symbol/XLK]), (IYW [https://seekingalpha.com/symbol/IYW]), (VGT [https://seekingalpha.com/symbol/VGT]), and semiconductors (SOXX [https://seekingalpha.com/symbol/SOXX]), (SMH [https://seekingalpha.com/symbol/SMH]) demonstrate comparatively lower impacts.

Morgan Stanley’s U.S. Equity Strategy team has integrated these findings into an overall AI value creation heat map, identifying healthcare equipment and services (IYH [https://seekingalpha.com/symbol/IYH]), (IXJ [https://seekingalpha.com/symbol/IXJ]), (XLV [https://seekingalpha.com/symbol/XLV]), (IHF [https://seekingalpha.com/symbol/IHF]), (IDNA [https://seekingalpha.com/symbol/IDNA]), (HTEC [https://seekingalpha.com/symbol/HTEC]), transportation (IYT [https://seekingalpha.com/symbol/IYT]), (XTN [https://seekingalpha.com/symbol/XTN]), consumer services, software (NYSEARCA:IGPT [https://seekingalpha.com/symbol/IGPT]), (XSW [https://seekingalpha.com/symbol/XSW]), capital goods, automobiles and components (DRIV [https://seekingalpha.com/symbol/DRIV]), and staples distribution and retail (XRT [https://seekingalpha.com/symbol/XRT]), (RTH [https://seekingalpha.com/symbol/RTH]), (IBUY [https://seekingalpha.com/symbol/IBUY]) as sectors with significant AI-driven value creation potential.

“We think industrials is an underappreciated structural beneficiary based on this analysis, which is supportive of our overweight stance,” Byrd emphasized.

Morgan Stanley projects AI-driven efficiency will contribute an incremental 30 basis points and 50 basis points to S&P 500 (SP500 [https://seekingalpha.com/symbol/SP500]) net margins in 2026 and 2027, respectively, with initial assessments pointing to “upside to our baseline estimates for AI-driven margin expansion.”

MORE ON AI AND ROBOTICS:

* Tracking Cathie Wood's ARK Invest 13F Portfolio - Q2 2025 Update [https://seekingalpha.com/article/4810688-tracking-cathie-woods-ark-invest-13f-portfolio-q2-2025-update]
* ARKQ: Alpha Is There, But It's Hidden Between The Lines [https://seekingalpha.com/article/4802215-arkq-alpha-is-there-but-its-hidden-between-the-lines]
* Beyond GICS, Why IGPT Offers A Truer AI Portfolio [https://seekingalpha.com/article/4800782-beyond-gics-why-igpt-offers-truer-ai-portfolio]
* We’re at the cusp of a ‘high-tech production boom’ – Wells Fargo [https://seekingalpha.com/news/4486571-we-re-at-the-cusp-of-a-high-tech-production-boom-wells-fargo]
* Cathie Wood doubles down on Elon Musk’s Tesla and buys the dip after earnings slide [https://seekingalpha.com/news/4472154-cathie-wood-doubles-down-on-elon-musk-s-tesla-and-buys-the-dip-after-earnings-slide]