Morgan Stanley: AI Investment From Cloud Providers to Hit $1.6 Trillion in 2027, US Stock Pullback Near End

On Oct. 19, Morgan Stanley strategists led by Michael Wilson said the U.S. stock market pullback is nearing its end and investors should be prepared to increase exposure to risk assets, focusing on quality companies with improving earnings expectations. The team said the selloff is close to finishing, and while the S&P 500 may still move lower quickly or gradually in November 2026, they view the decline as a buying opportunity rather than the start of a new deep bear market.

Their recommended stocks include companies with quality attributes, upward earnings revisions and Morgan Stanley overweight ratings, such as Alphabet, Apple, Broadcom, Micron, Visa, Mastercard, Costco, Trane Technologies and Vertiv.

On AI investment, Morgan Stanley expects capital spending by major cloud providers and emerging cloud service providers to keep growing, reaching $1.6 trillion in 2027 and $1.8 trillion in 2028. The bank also estimates that AI capital expenditure will directly contribute a quarter of the revenue growth of S&P 500 constituents in 2027.