AI Investment Cycle Set For Software Shift By 2028: Morgan Stanley

businessworld.in Sep 28, 2026

AI Investment Cycle Set For Software Shift By 2028: Morgan Stanley

Curated by Shubham · TechCapsules · Sep 28, 2026

AI-summarised brief · reviewed before publication

Morgan Stanley Research projects a sharp slowdown in hyperscaler and neocloud capital expenditure, falling from a 93 % year‑on‑year increase in 2026 to 61 % in 2027 and just 14 % in 2028. The deceleration signals a transition from the infrastructure‑heavy phase of the AI investment cycle to greater focus on software, AI applications and services. Despite the moderation, demand for AI‑related infrastructure will stay robust, constrained by a projected 57‑gigawatt power shortfall and local opposition that has delayed or cancelled projects worth $286 billion since 2025. Companies have reported an average 9.6 % productivity gain from AI, and Morgan Stanley expects AI‑driven margin expansion of about 100 basis points through 2027. Early software providers and firms leveraging AI for productivity are poised to attract heightened investor attention as the cycle matures.

💡 Why It Matters

· The shift redirects capital from hardware to software, positioning firms that can monetize AI‑driven productivity gains to capture the next wave of investment returns.

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