Of course, the AI party is ending. Did you really think the free-for-all of printing money based on a chatbot's ability to write a college essay was going to last forever? Give me a break. For the last three years, Wall Street has been acting like a frat house that just discovered an unlimited keg. Now, the RA is knocking on the door, and the RA’s name is Morgan Stanley.
The big brains over at Morgan Stanley Wealth Management finally stated the obvious in a new report. The gist? Morgan Stanley warns AI stock boom is running out of steam. They’re pointing to the S&P 500 RavenPack AI Sentiment Index, which is up a measly 6% this year, while the broader S&P 500 is cruising along at over 14%. It turns out that a market built entirely on one idea—AI will solve everything!—is, you know, a little unstable.
Since ChatGPT was unleashed on an unsuspecting public in late 2022, AI-related stocks have accounted for something like 75% of the S&P 500’s returns and 80% of its earnings growth. It’s been a “one-note narrative,” as the bank so delicately puts it. I’d call it a one-trick pony. And that pony is starting to look tired, limping, and frankly, a bit sad.
The Seventh Inning of a Really Boring Game
Lisa Shalett, the chief investment officer at Morgan Stanley, says “we’re closer to the seventh inning than the first.” A baseball analogy. How quaint. Let me translate that from sanitized corporate-speak into English: The game is almost over, your team is losing, the beer is warm, and you’re starting to think about beating the traffic on the way out of the parking lot.
The whole boom was like a sugar high. It felt great for a while, but it was never real energy. It was just a temporary rush built on hype and the desperate hope that some new tech would save us from having to deal with our actual economic problems. The market wasn't a complex, diversified engine; it was a single, overheated server farm in Virginia, and now the cooling fans are starting to fail.
Why is the party ending? The reasons are so predictable it’s almost painful. First, the hyperscalers—the big tech giants—are seeing their free-cash-flow growth turn negative. Translation: they’re spending more money than they’re making. Shocking, I know. Second, price competition is heating up. When everyone is selling the same magic beans, you eventually have to lower your price.
And my favorite part: the report says recent deals “smack of speculation and vendor-financing strategies of old.” That’s the most polite way I’ve ever heard someone say, “This whole thing is starting to look like a Ponzi scheme.” It reminds me of the dot-com bust, where companies were just buying each other’s useless services with stock to create the illusion of revenue. We learned nothing. Absolutely nothing.
"Shifting Gears" is Just Code for Screeching to a Halt
Now, you’ll hear the optimists, the people who are still desperately trying to keep the music playing, say things like, “AI spending isn’t falling off, it’s shifting gears.” That’s a real quote from an industry CEO. It’s a masterful piece of public relations. “Shifting gears” sounds so deliberate, so strategic. It sounds like a race car driver expertly navigating a turn.
But what it really means is that companies are slamming on the brakes. The "sprint" phase of buying every chip in sight is over. Now comes the "marathon" phase, where boards and shareholders start asking annoying questions like, "So, what's the return on the billions of dollars we just set on fire?" This is the part where the hype dies and reality kicks in.
This is a bad idea. No, 'bad' doesn't cover it—this is a five-alarm dumpster fire for the smaller players. The big fish like Microsoft and Google will be fine; they’ll keep investing. But the hundreds of smaller AI startups with no real contracts, no access to the insane amounts of power these things need, and no actual cash flow? They’re about to get wiped out. The easy money is gone. This ain't 2023 anymore.
So what does this mean for the average person who got suckered into this? Well, Morgan Stanley is basically telling its clients to run for the hills. Their advice is to sell the “unprofitable tech and low-quality meme stocks” and buy… get this… “real assets.” Gold. Real estate. Commodities. Things you can actually touch. It’s the financial equivalent of a doomsday prepper stocking up on canned goods because they think the apocalypse is coming. After three years of telling us the future is digital, ethereal, and powered by algorithms, the smartest guys in the room are now telling us to go buy a gold bar and bury it in the backyard. The irony is so thick you could cut it with a knife.
Honestly, this whole cycle is exhausting. I remember getting a demo for some AI-powered home assistant last year. It promised to organize my life, manage my schedule, and even offer emotional support. It ended up just repeatedly trying to get me to buy paper towels from Amazon and playing the wrong song. And they wanted $20 a month for that privilege…
The experts are now saying that these AI stocks are "hard to value." One professor admitted, "Will they grow 300% or only 200%? This is anyone's guess." Offcourse it's a guess! That’s what a bubble is. It’s not investing; it’s gambling. It’s a collective delusion where everyone agrees to pretend something is worth a trillion dollars until, one day, they don’t.
So, We're Back to Reality, Huh?
The AI gold rush was never about building a better future. It was about finding the next big thing to inflate before cashing out and leaving retail investors holding the bag. It worked for a while. But the hangover is here. All the tough questions about profitability, utility, and actual value—the ones that should have been asked on day one—are finally being whispered in boardrooms. The “revolutionary technology” is now just another line item on a spreadsheet that needs to be justified. Welcome back to earth.
Tags: morgan stanley