Morgan Stanley believes the artificial intelligence boom is entering a decisive new phase, where enthusiasm alone will no longer be enough to support valuations.
In a new CNBC interview, Katerina Simonetti, executive vice president at Morgan Stanley Private Wealth Management, says 2026 will be the year investors demand tangible financial returns from AI investments, not just promises built on infrastructure spending.
After years focused on building data centers and AI capacity, Simonetti says the market is shifting from construction to execution, where investors will focus on whether AI can generate durable earnings and margins.
“There’s no way to hide the excitement behind technology. AI, generative AI, is changing the world, changing the way we do things. But now the question is, how do we actually use it? How do we implement it? And how do we get profitability out of it? And it’s that show me the money moment that is going to be whether it works or not in 2026.”
At the same time, Morgan Stanley tells investors to broaden their exposure beyond crowded technology trades. Simonetti says her team is advocating selective profit-taking in tech while reallocating toward areas of the market that have quietly delivered strong results.
“When something is up, we absolutely don’t advocate changing the strategy, but taking a little bit of money off the table. Plus, we love thinking of tech as something that drives the markets. But when we look at the last couple of years, let’s look at the industrials. Let’s look at financials. Let’s look at this exceptional performance in the sector. So we advocate profit taking, broadening of the market, taking advantage of the international opportunities where valuations are not quite as high as here in the US, and also just taking the tax losses. We have to do it in a tax-efficient way.”
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