The three major frontier areas: AI, longevity, decarbonization.

Wallstreetcn
2024.03.04 02:10
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According to Morgan Stanley's calculations, Europe will invest 5 trillion euros in decarbonization. The market potential for smart chemicals (in the next 15 years) and obesity treatment (by 2030) is $140 billion and $77 billion respectively. The total cost of AI investment will exceed $500 billion.


This article is written by Michael Zezas, Global Head of Fixed Income Research at Morgan Stanley, translated by Wall Street News:

In 2024, we are particularly focused on three long-term themes - life extension, the widespread adoption of AI technology, and decarbonization - which will determine the direction of the market. Given their importance, we plan to conduct in-depth cross-asset and collaborative research on each theme this year. While our current research mainly reveals opportunities and insights in various industries, macro investors should take note that the broad impact of these themes is about to emerge. Here are some key findings we have summarized:

  • €5 trillion: Our global economy and European utilities team expects that by 2030, investments in decarbonizing energy systems in Europe will reach €5 trillion. These efforts are expected to promote economic growth and drive inflation, but the specific impact is still unclear. A clear investment direction is to focus on industries that will benefit from decarbonization investments, such as utilities and grid operators.

  • $140 billion and $77 billion: These are our team's total market potential forecasts for smart chemicals (over the next 15 years) and obesity treatment (by 2030). Regarding the life extension theme, we see more and more companies investing in and achieving technological breakthroughs that can extend human life. Although the macro impact of this theme is still under study, it is evident that the pharmaceutical industry will be a significant beneficiary.

  • Over $500 billion: We expect that due to the widespread adoption of artificial intelligence, cloud computing migration, and the requirements of data sovereignty, the size of the European data center market will grow fivefold by 2035, from the current over 4,000 megawatts to over 20,000 megawatts. It is estimated that the cost of completing this expansion will start at $150 billion for infrastructure construction, and adding AI capabilities may push the total cost to over $500 billion.

Looking ahead, we have a lot of work to do, especially in the fixed income field, to delve into the macro market impacts of these trends.

  • For example, regarding the impact of AI on labor, as my colleague Seth Carpenter pointed out in a recent report, breakthroughs in AI applications that enhance productivity do not necessarily lead to job losses. Improving productivity may incentivize more investment, thereby raising real interest rates.
  • Concerning life extension, a question that clients often ask is whether breakthroughs in the health sector will have a positive financial impact on bond investors, such as reducing deficits. For instance, in the United States, there is an assumption that breakthroughs in preventive healthcare will reduce spending on Medicare and Medicaid. However, correctly evaluating this assumption requires considering other important factors, such as whether new medical expenses will emerge, offsetting some of the savings (e.g., if people live longer, will more orthopedic treatments be needed?).

In short, while the macro impacts of these themes are complex, understanding them is crucial. We will continue to conduct in-depth research.