Summary of Key Points from Morgan Stanley Research Conference Call Industry and Company Overview - The conference call focuses on thematic investing and macroeconomic trends for 2026, highlighting four key themes: AI/Tech Diffusion, The Future of Energy, The Multipolar World, and Societal Shifts [2][3] Core Insights and Arguments 1. **Thematic Investing Performance**: In 2025, thematic stock categories outperformed MSCI World and S&P 500 by 16% and 27% respectively, indicating the effectiveness of thematic investing strategies [3] 2. **AI and Tech Diffusion**: The call discusses the significant advancements in AI, particularly in the U.S., where American LLMs (Large Language Models) are expected to achieve substantial capability improvements in the first half of 2026, outpacing Chinese counterparts [7] 3. **Compute Demand vs. Supply**: There is a projected shortfall in compute supply due to the exponential growth in AI adoption, leading to increased demand for data center capabilities [7] 4. **U.S. Policy Agenda**: The Trump administration is expected to take stronger actions to secure domestic supplies of critical minerals and support re-shoring of manufacturing, which may impact various sectors [7] 5. **AI Technology Transfer**: China is anticipated to push for more extensive AI technology transfers from the U.S., which could alter trade dynamics and national capabilities in AI [7] 6. **Energy Politics**: Rising global energy costs are leading to backlash against data center growth, prompting a shift towards low-cost energy solutions and off-grid strategies [10] 7. **AI and Energy Convergence**: Major AI companies are taking steps to control energy infrastructure to ensure reliable and cost-effective energy supply, which is crucial for their operations [10] 8. **Global Manufacturing Dynamics**: China is increasing its share in global technology manufacturing, while the U.S. is experiencing a renaissance in re-shoring, particularly in tech-heavy industries [10] 9. **Latin America Investment Cycle**: A combination of policy shifts, changing geopolitics, and peak interest rates is expected to drive a new investment cycle in Latin America, focusing on investment rather than consumption [10] 10. **Job Reskilling Initiatives**: There are numerous corporate and government initiatives aimed at reskilling workers affected by AI-driven job losses, reflecting political sensitivity to employment changes [10] 11. **Transformative AI Impact**: By the second half of 2026, transformative AI is expected to drive deflation, increased capital expenditures, and changes in asset valuations, potentially leading to greater wage inequality [10] Other Important Insights - The thematic lens is seen as a powerful tool for identifying investment opportunities during periods of market volatility, with a focus on societal impacts driven by demographic changes and technological advancements [2] - The report emphasizes the importance of understanding the economics of LLM developers at the data center level, suggesting attractive economic conditions for investors [7] - The call highlights the need for investors to consider the broader implications of AI and energy dynamics on various industries and investment strategies [10]

Summary of the Americas Thematic Focus List Conference Call Industry and Company Overview - **Industry**: The thematic focus is on various sectors across North America and Latin America, particularly in technology, energy, healthcare, and education. - **Companies Featured**: The focus list includes notable companies such as Amazon, Microsoft, NVIDIA, Eli Lilly, and Walmart, among others. Key Themes for 2026 1. **Tech Diffusion**: Emphasizes the rapid adoption of AI technologies across various sectors, with significant implications for productivity and competitive dynamics [12][14]. 2. **The Future of Energy**: Focuses on the increasing demand for energy driven by AI infrastructure and the transition to renewable energy sources [12][17]. 3. **The Multipolar World**: Highlights the shift towards localized supply chains and national economic security, impacting multinational corporations [12][13]. 4. **Societal Shifts**: Explores the implications of demographic changes, AI-driven employment disruption, and evolving consumer preferences [12][18]. Americas Thematic Focus List - **List Composition**: The focus list includes 18 high-conviction stock ideas, with a target holding period of 12-18 months [9][20]. - **Key Companies on the List**: - **Amazon (AMZN)**: Positioned as a leader in AI infrastructure, with a projected 32% upside to a price target of $238.18 [23]. - **Microsoft (MSFT)**: Expected to capture significant AI spending, with a 42% upside to a price target of $456.66 [23]. - **Eli Lilly (LLY)**: A leader in the GLP-1 market, with a 25% upside to a price target of $1,032.97 [23]. - **Walmart (WMT)**: Leveraging AI for operational efficiency, with a 13% upside to a price target of $119.20 [23]. Methodology and Specifications - **Focus List Size**: 15-20 stocks, with equal weighting upon construction [21]. - **Sector Weights**: No fixed sector weights, aiming for diversification [21][22]. - **Regional Weights**: Targeting 80-85% in the USA and 15-20% in Latin America [28]. Important Insights and Data - **Amazon's Growth**: Amazon's custom silicon strategy has grown 150% sequentially, indicating strong demand for its AI capabilities [29]. - **Eli Lilly's Market Potential**: The global diabesity market is projected to exceed $150 billion by the early 2030s, with significant growth opportunities for Eli Lilly [39]. - **NVIDIA's Dominance**: NVIDIA is positioned to capture a significant share of the projected $3-4 trillion in annual AI infrastructure spending by the end of the decade [53]. - **Walmart's AI Strategy**: Walmart's AI initiatives have led to a 50% automation rate in its supply chain, significantly reducing delivery costs [68]. Conclusion The Americas Thematic Focus List presents a strategic overview of high-conviction investment opportunities across key sectors, driven by transformative themes such as technology diffusion and energy transition. The insights provided highlight the potential for significant growth and the evolving landscape of investment in the Americas.

Summary of Key Points from the Conference Call Industry and Company Overview - The conference call focuses on thematic investing strategies and predictions for 2026, led by Morgan Stanley Research, emphasizing four key themes: Tech Diffusion, The Future of Energy, The Multipolar World, and Societal Shifts [3][22]. Core Themes and Predictions 1. **Key Themes for 2026**: - **Tech Diffusion**: Continued acceleration in AI capabilities and adoption across various sectors [3][35]. - **The Future of Energy**: Anticipated growth in energy demand, particularly driven by AI infrastructure, with a projected 10% increase in US energy consumption over the next decade [36]. - **The Multipolar World**: Shift towards localized supply chains and reduced dependency on global trade, with significant implications for national security and economic policies [32][34]. - **Societal Shifts**: Evolution of the Longevity theme to encompass broader societal impacts, including AI-driven job displacement and changing consumer preferences [4][38]. 2. **Performance Metrics**: - In 2025, thematic stock categories achieved an average price increase of 38%, outperforming the S&P 500 and MSCI World by 16% and 27%, respectively [8][23]. 3. **Thematic Predictions for 2026**: - Non-linear improvements in large language models (LLMs) and a systematic shortage of computational power due to rising demand [15][16]. - An aggressive US policy agenda aimed at reducing dependency on China for critical materials and enhancing domestic manufacturing capabilities [18]. - Increased focus on energy costs and their implications for data center growth and local energy policies [18]. Additional Insights - **AI and Employment**: The theme of Societal Shifts includes a focus on re-skilling initiatives and policy interventions to address job losses due to AI adoption [21][38]. - **Investment Opportunities**: The intersection of themes presents new investment opportunities, particularly in sectors that align with the evolving geopolitical landscape and technological advancements [39]. - **Regional Performance**: APAC stocks have shown strong thematic alpha across various categories, while North American stocks excelled in AI and defense-related themes [26]. Conclusion - Morgan Stanley's thematic investing framework is positioned as a powerful tool for identifying attractive investment opportunities amid market volatility, with a comprehensive focus on the interplay between technology, energy, geopolitics, and societal changes [3][8][22].