Episode summary
AI’s Next Winners: Signals From Private Markets
Thoughts on the Market (Morgan Stanley)
· · 10 min · Hosts: Seth Carpenter, Michael Gapen, Yens Eisenmidz, Jathan Aaya · Guests: Sabrina Hao, Adam Wood, Brian Nowak
Summary
Morgan Stanley’s analysts came away from Spark more constructive on the AI cycle, arguing that private markets are already showing tangible payoffs while public investors are still waiting for proof. The host said startups are scaling at extraordinary speeds, with one approaching $4 billion in annual recurring revenue in two years and another reaching $1 billion in under a year.
Adam Wood drew a sharp distinction between fast-moving coding and inference tools and slower-to-adopt application software. He argued that the speed of build and adoption is much higher for the tooling layer, while enterprise applications face more integration, workflow and control requirements. He also said public software names can mask fast AI growth inside slower legacy businesses.
Brian Nowak said the shift from AI assistance to agents could address a $30 trillion to $40 trillion opportunity across consumer and enterprise use cases. Both analysts emphasized that models are becoming table stakes, with value moving to orchestration, data, workflows and implementation. Brian also argued that the most durable opportunities may extend into the physical world, including robotics, logistics, manufacturing, defense and agriculture.
Key takeaways
- The host said Spark reinforced Morgan Stanley’s view that AI demand is real and private-market returns are starting to show up now.
- Adam Wood said coding and inference tools can scale faster than application software because they are easier to build and adopt.
- Brian Nowak said agentic AI could address a $30 trillion to $40 trillion spend opportunity across consumer and enterprise markets.
- Adam Wood said durable value in software is shifting from the model itself to orchestration, workflows and integration.
- Brian Nowak said the strongest AI moats may increasingly come from physical-world applications such as robotics, logistics and manufacturing.
Notable quotes
“we're already seeing that payoff in private markets. AI demand is real, companies are delivering tangible returns for customers, and startups are scaling faster than ever”
“we used to discuss how quickly a company could get to a $1 billion so-called unicorn valuation and now we're discussing how quickly they can get to a unicorn revenue run raise of a billion dollars”
“we've sized potential addressable markets of 30 to 40 trillion dollars of spend on both the consumer side and the enterprise side that we think can be addressed by Aentic tools”
“the moat protecting the existing business that you have and the journey turning AI into new growth opportunities”
“AI is not just software. AI is going to get physical through new types of robots that impact the entire globe”
How the episode opens
Welcome to Thoughts on the Market. I'm Sabrina How, Morgan Stanley's AI and tech thematic equity strategist. — And I'm Adam Wood, head of US software research at Morgan Stanley. — And I'm Brian Noak, head of US internet research.
Today, what private companies are telling us about the AI opportunity and what it means for public markets. It's Tuesday, October 20th at 10 a.m. in New York.
Last week, we were at our Spark private company conference in California, bringing together more than a hundred startups across software, robotics, AI, infrastructure, and beyond. There was even a company helping to manufacture pharmaceuticals in space. It was a really interesting week to be at the conference given everything that was happening in the market.
But really, we came away feeling even more positive about the AI cycle. While public market investors are waiting for returns to justify trillions of dollars in AI spending, we're already seeing that payoff in private markets. AI demand is real, companies are delivering tangible returns for customers, and startups are scaling faster than ever.
Adam, let's start with growth. We heard from startups scaling at extraordinary speeds. One was approaching 4 billion in annual recurring revenue in two years, another reaching a billion in under a year.
what really stood out to you about the pace of AI adoption and why aren't we necessarily seeing that same growth at established software companies?
So yeah, absolutely the pace was remarkable and clearly one of the standouts from the conference. I mean we used to discuss how quickly a company could get to a $1 billion so-called unicorn valuation and now we're discussing how quickly they can get to a unicorn revenue run raise of a billion dollars which for me is is is quite incredible.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- ai startup returns
- private market signals
- competitive moats
- public market implications
- ai scaling
Companies and tickers mentioned
- MS
- Morgan Stanley
Watch the episode
Watch “AI’s Next Winners: Signals From Private Markets” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
More from Thoughts on the Market (Morgan Stanley)
Thoughts on the Market (Morgan Stanley), this episode and its artwork belong to Morgan Stanley. Octagon is not affiliated with the show; this page is an independent summary.
