Shares in banking giant Morgan Stanley (MS) edged higher today as it was hailed as the financial powerhouse of the AI revolution.
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Morgan Stanley Leads the Pack
Data compiled by Bloomberg has revealed that Morgan Stanley has led or co-led around $65 billion in corporate bond deals for data centers or other AI investments since October. That is more than any other large U.S. bank.
These deals include arranging more than $27 billion of debt for a special purpose vehicle that allowed Meta Platforms (META) to fund the building of its Hyperion AI data center in Louisiana off balance sheet, preserving the firm’s credit ratings. The bank also secured billions in orders for bonds sold by crypto-mining firms TeraWulf (WULF) and Cipher (CIFR) by attaching a unique financial backstop from Google (GOOGL) to the deals. It has also had a role alongside other banks on bond deals for Alphabet (GOOGL) and Amazon (AMZN).
Morgan Stanley’s AI strategy as well as a strategic push into debt capital markets has also helped it increase its overall share of arranging U.S. investment grade bond deals. The data found that excluding self-led deals, it’s been ranked third this year, up from fourth in 2024.
AI Bubble is a Risk
It is likely given the boom in demand for AI that Morgan Stanley can expect further debt-fueled growth. Cloud computing giants will spend some $3 trillion by 2028 to fuel the AI expansion, an infrastructure overhaul partially financed by debt, its own strategists have predicted.
But there might be some clouds on the horizon given fears over an AI bubble. Investors are concerned about the lofty valuations of AI stalwarts such as Nvidia (NVDA) and the strength of huge spending commitments from the likes of Meta. This is despite impressive share growth from U.S. tech titans this year – see below:
Investors are also concerned about the levels of debt many of these businesses have taken on if the anticipated demand fails to materialize. Bloomberg has reported that financial players — including Morgan Stanley — are alert to the risks. Indeed, the bank has considered offloading some of its data-center exposure.
But it remains proud of its ‘go-to’ status in the tech sector. “We have banked many of these clients since their inception,” Anish Shah, global head of debt capital markets at Morgan Stanley, said. “Now, they’re mega-cap hyperscalers. Those relationships are very deep.”
Is MS a Good Stock to Buy Now?
On TipRanks, MS has a Moderate Buy consensus based on 7 Buy and 7 Hold ratings. Its highest price target is $198. MS stock’s consensus price target is $177.15, implying a 0.45% downside.
