Thoughts on the Market
Where Investment Themes Intersect and Beat Markets
Why It Matters
Understanding how AI, energy, and geopolitics intersect reveals the underlying forces reshaping global markets, offering investors a roadmap to capture outsized returns. As compute demand strains power supplies and geopolitical tensions reshape supply chains, these themes will influence economic growth and investment opportunities well beyond 2026, making the episode highly relevant for anyone tracking future market dynamics.
Key Takeaways
- •AI token usage surged 250% since January, hitting 22.7T weekly.
- •AI will affect 90% of jobs, net 4% employment loss.
- •Data centers may need 130 GW extra power by 2028.
- •US could face 10‑20% power shortfall supporting AI growth.
- •Thematic portfolios outperformed S&P 500 by 27 points in 2025.
Pulse Analysis
Stephen Byrd opened the episode by highlighting an unprecedented surge in artificial‑intelligence activity. 7 trillion—a 250 percent increase since early January—pushing compute demand beyond current supply. He emphasized that AI is not merely automating tasks; it will touch 90 percent of occupations, with a net 4 percent job loss offset by new hires in emerging roles. This rapid capability upgrade creates a clear investment narrative: firms that supply chips, cloud services, and AI‑enabled software stand to capture outsized returns.
The conversation then turned to the energy implications of that compute boom. Byrd projected an additional 130 gigawatts of data‑center power needed by 2028, warning that the United States could experience a 10‑20 percent shortfall if infrastructure lags. He linked this strain to recent geopolitical shocks, notably the Iran conflict, which disrupted global energy flows and accelerated a push for national self‑sufficiency in critical minerals and power generation. The convergence of AI, energy security, and geopolitics, he argued, reshapes policy priorities and opens new avenues for investors focused on sustainable infrastructure.
Finally, Byrd reviewed performance metrics for Morgan Stanley’s thematic baskets. In 2025 the ten themes averaged a 38 percent gain, outpacing the S&P 500 by 27 percentage points, and they remain 12 points ahead year‑to‑date in 2026. The strongest contributors—AI infrastructure, energy security, defense, healthcare, and even humanoid robotics—illustrate how intersecting megatrends generate alpha. He concluded that recognizing these overlaps, rather than treating each theme in isolation, will be the key to navigating markets and delivering long‑term investment value.
Episode Description
Our Global Head of Thematic and Sustainability Research Stephen Byrd unpacks how major investment themes for 2026 are increasingly interconnected, generating gains for investors.
Read more insights from Morgan Stanley.
----- Transcript -----
Welcome to Thoughts on the Market. I’m Stephen Byrd, Morgan Stanley’s Global Head of Thematic and Sustainability Research.
Today – how our 10 big thematic predictions are playing out and driving global markets.
It’s Monday, April 20th at 11:30am in New York.
Back in January, we laid out four key themes – AI & Tech Diffusion, the Future of Energy, a Multipolar World, and Societal Shifts. And we laid out 10 specific thematic predictions about forces shaping 2026. It is really striking to me how quickly the landscape has shifted and how significant these trends have become in just a short period of time.
Even more striking is how these mega secular themes are converging. AI is driving unprecedented demand for compute and energy. Energy is becoming a strategic priority for nations. And geopolitics is shaping access to both.
So, let’s start with the most important development: the acceleration of AI. Now we expected strong progress in terms of large language model development, but what we’re seeing is really a step-change upward in capability. And this is driving an extraordinary surge in demand for compute. Global AI usage has jumped sharply with weekly usage; and we measure weekly usage in terms of how many tokens are used. Tokens are really a measure of small units of text. It's a fairly standard measure of demand for compute. That token usage has risen by about 250 percent 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.
Now, at the same time, AI is reshaping the labor market. We estimate that automation or augmentation will impact 90 percent of occupations; so almost every job will be affected. But the effect is not binary.
So we recently assessed the impacts to employment in five sectors where we believe the impact of AI adoption could be the biggest. And on net we see a 4 percent job loss, driven by 11 percent of outright elimination of jobs. 12 percent of jobs that were not backfilled, partially offset by 18 percent of new hires. So the real story is transformation. AI is changing how work gets done, reshaping roles rather than simply replacing them.
But AI does not operate in a vacuum. It runs on energy. And that’s the second major shift since January. We now estimate global data center power demand could increase by nearly 130 gigawatts by 2028, with the U.S. potentially facing a 10–20 percent shortfall in power availability needed to support that growth.
That’s why the Future of Energy is such a central theme. AI growth is directly tied to energy availability, cost, and infrastructure, and increasingly, to national policy.
And that brings us to the third major development: geopolitics. We certainly did not anticipate the Iran conflict, but it has had a significant impact on energy markets, including supply disruptions that have rippled across global energy systems. And more broadly, we’re seeing a global push towards national self-sufficiency; this is a big driver for many years to come – in energy, critical minerals, and technology. And this clearly aligns with our Multipolar World theme, where countries are prioritizing control over key economic inputs. This shift is likely to be a major driver of markets not just this year, but well beyond.
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 percent 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.
So what’s the takeaway from revisiting our predictions? 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 are now deeply interconnected forces shaping the global economy. And understanding those intersections may be the key to understanding markets and generating alpha for years to come.
Thanks for listening. If you enjoy the show, please leave us a review wherever you listen and share Thoughts on the Market with a friend or colleague today.
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