Episode summary
Where Investment Themes Intersect and Beat Markets
Thoughts on the Market (Morgan Stanley)
· · 5 min · Guests: Stephen Byrd
Summary
Stephen Byrd says the biggest market story of 2026 is not any single theme, but the way major themes are converging. He points to faster-than-expected AI progress, a surge in compute demand, tighter power constraints, and geopolitics increasingly shaping access to energy, critical minerals, and technology.
Byrd says weekly AI token usage has risen about 250% since early January, from 6.4 trillion to 22.7 trillion, pushing compute demand above supply. He also estimates AI could affect 90% of occupations, with a net 4% job loss in five sectors he studied as hiring offsets some elimination and backfilled roles.
Energy is the second key constraint. Byrd estimates global data center power demand could rise by nearly 130 gigawatts by 2028, while the U.S. could face a 10% to 20% shortfall in power availability to support that growth. He argues that thematic investments tied to AI infrastructure, energy security, defense, healthcare, and humanoid robotics have already rewarded investors, and that the intersections among AI, energy, and geopolitics may be the most important source of alpha going forward.
Key takeaways
- Byrd says weekly AI token usage jumped about 250% since early January, signaling compute demand now exceeds supply.
- He estimates AI could affect 90% of occupations, but his five-sector analysis points to a net 4% job loss, not wholesale replacement.
- He expects global data center power demand to increase by nearly 130 gigawatts by 2028, with the U.S. potentially short of power by 10% to 20%.
- Byrd says thematic categories tied to his key themes outperformed the S&P 500 by 27 percentage points in 2025 and are still ahead by 12 points in 2026 year to date.
- He argues that AI, energy, and geopolitics are now interconnected market drivers, not separate investment stories.
Notable quotes
“AI is driving unprecedented demand for compute and energy. Energy is becoming a strategic priority for nations and geopolitics is shaping access to both”
“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”
“We estimate that automation or augmentation will impact 90% of occupation”
“We now estimate global data center power demand could increase by nearly 130 gawatt by 2028 with US potentially facing a 10 to 20% shortfall in power availability needed to support that growth”
“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”
How the episode opens
Welcome to Thoughts on the Market. I'm Steven Bird, 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 11:30 a.m. in New York. Back in January, we laid out four key themes: AI and tech diffusion, the future of energy, a multi-olar world, and societal shifts.
and we laid out 10 specific thematic predictions about forces shaping 2026. It's 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% 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% of occupation. So almost every job will be affected.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- investment themes
- ai energy crunch
- compute power
- geopolitics
- sustainability research
Watch the episode
Watch “Where Investment Themes Intersect and Beat Markets” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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