A senior Morgan Stanley researcher says the biggest forces shaping markets in 2026 are no longer moving independently, and that investors who understand where they intersect are best positioned to generate outsized returns.
In a new episode of Morgan Stanley’s Thoughts on the Market podcast, Stephen Byrd, the bank’s global head of thematic and sustainability research, says the convergence of three major structural forces has created the most important investment stories of the year.
“The biggest changes in 2026 are not happening in isolation, but at the intersections of our key themes. AI, energy, and geopolitics are no longer separate stories. They’re now deeply interconnected forces shaping the global economy. And understanding these intersections may be the key to understanding markets and generating alpha for years to come.”
In investing, alpha generation refers to the process of producing investment returns that exceed a specific benchmark or the overall market, often referred to as beating the market or producing excess return.
At the center of his outlook is a supply-and-demand imbalance in compute, which Byrd says has become the defining investment opportunity of the year.
“Global AI usage has jumped sharply with weekly usage. That token usage has risen by about 250% just since early January, from 6.4 trillion tokens a week to 22.7 trillion, pushing us into a world where compute demand exceeds supply.
This is one of the defining investment stories of 2026, and I see a lot of alpha generation around this opportunity.”
The Morgan Stanley executive says the bank’s investment thesis is already playing out in markets. He also reiterates the bank’s top sector picks, which continue to benefit from AI, energy and geopolitics.
“These big structural forces are already showing up in performance. The thematic categories that we developed that are aligned with our key themes were up 38% on average in 2025, outperforming the S&P 500 by 27 percentage points. And year to date in 2026, they’re still ahead by 12 points. The strongest areas reflect exactly these dynamics: AI infrastructure, energy security, defense, healthcare and emerging areas like humanoid robotics.”
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