Here’s how to position your portfolio for the next AI wave, according to Morgan Stanley

Morgan Stanley analysts suggest the AI trade may be broadening beyond the hardware companies that led the first phase. While they see room for AI hardware stocks to keep rising, they argue it is time to diversify into a wide variety of industries that are beginning to realize AI benefits.

The shift matters because it points to a change in where the market expects AI-driven earnings to appear. Early gains concentrated in chipmakers and equipment suppliers, but as AI tools are adopted across sectors, the productivity and cost effects may surface in software, services, healthcare, financials and industrials. For investors, that reframes AI exposure from a single theme into something closer to a general market factor.

What to watch: whether non-hardware companies begin reporting measurable AI-related revenue or efficiency gains, and whether hardware leadership persists alongside broader participation. The pace of corporate AI spending, capex guidance and adoption commentary in upcoming earnings will indicate if this broadening thesis is playing out.