Love it or hate it, Artificial Intelligence is driving economic growth across the country, a new report issued by the investment bank and financial services company Morgan Stanley declares, with that growth expected to continue well into next year.
“AI-related spending is the dominant force in the current investment cycle,” says Morgan Stanley’s 2026 Investment Outlook, noting that such investment is regarded as “critical to the resilient U.S. growth outlook.”
Altogether, business spending on AI is now forecast to increase by 7% in the upcoming fourth quarter of this year over October to December of 2025, with yet another 8% increase projected for 2027.
“Companies’ spending on data center infrastructure continues to exceed investors’ expectations,” says the Morgan Stanley document, adding: “This dynamic is consistent with an early-stage investment cycle in which scaling capacity is more important than optimizing it.”
Such investment, acknowledges the report, started out as a phenomenon largely based in the U.S., but is now also “dependent on global manufacturing and supply chains.”
This means that upwards of 20% of all imports into the U.S. are now in some way connected to the AI boom, while the technology has “increasingly become a global growth driver.”
That global trendline may also see manufacturing in any number of Asian countries “posed to enter an industrial super-cycle” fueled by AI demand and growth.
While AI’s pro-growth path, according to the report, is clearly spurring the economy, oil prices remain a big question mark with a slowing of consumer prices “interrupted by the energy supply shock.”
For all of that, it is expected that higher oil prices will to a degree be “offset by a lessening in the impact of tariff-related inflation in the second half” of this year.
Trying to ascertain how the Federal Reserve will respond to all these trends, the Morgan Stanley report is guessing that interest rates will be cut by upwards of 3% to 3.2% in the early months of next year.
May 26, 2026
By Garry Boulard
Graphic courtesy of Pixabay
