tl;dr
**AI’s Long Game: How Lower-Tech Sectors Could Outperform in the Tech Boom**
When Morgan Stanley’s Stephen Byrd, global head of thematic research, recently appeared on CNBC, he delivered a surprising take on the AI-driven future: the biggest winners might not be the usual tech titans. Instead, se...
**AI’s Long Game: How Lower-Tech Sectors Could Outperform in the Tech Boom**
When Morgan Stanley’s Stephen Byrd, global head of thematic research, recently appeared on CNBC, he delivered a surprising take on the AI-driven future: the biggest winners might not be the usual tech titans. Instead, sectors like consumer services, manufacturing, and healthcare could see transformative gains, thanks to a projected $13–$16 trillion boost to the S&P 500. But here’s the catch: the real rewards won’t materialize overnight.
Byrd’s analysis reveals that while high-tech industries like software and semiconductors are obvious beneficiaries of AI, lower-tech sectors stand to gain even more relative to their current income levels. For example, fully adopting AI in manufacturing could boost some companies’ pre-tax income by over 50%. “This is the long game,” Byrd emphasized. “It’s not next quarter—it will take years to fully develop.”
### **Manufacturing: Robots on the Rise**
One sector where AI is already reshaping the landscape is manufacturing. Byrd pointed to “embodied AI”—robotics enhanced by artificial intelligence—as a game-changer. Imagine a factory where robots, costing just $5 an hour to operate, handle repetitive tasks with precision, slashing production costs and boosting output. This could give U.S. manufacturers a competitive edge, but it’s not without risks.
“Employment displacement is a real concern,” Byrd admitted. However, he noted a key distinction: while robotics might replace certain jobs, software-based AI (or “agentic AI”) is more likely to augment human workers. Think of AI tools that assist doctors in diagnosing diseases or help engineers design products faster, rather than replacing them entirely.
### **Healthcare: A New Era of Accuracy**
If manufacturing is about efficiency, healthcare is about transformation. Byrd highlighted Microsoft’s AI tool, which is already outperforming top human physicians in diagnosing patients at a fraction of the cost. This isn’t just hype—it’s a glimpse into a future where AI-driven diagnostics could revolutionize care, reduce errors, and lower healthcare costs.
But this shift raises questions: How will this affect medical professionals? Will AI become a collaborator or a replacement? Byrd’s take? “It’s a balance. The most impactful AI applications will work *with* humans, not against them.”
### **The Long Road Ahead**
Despite the potential, Byrd stressed that the AI boom is a marathon, not a sprint. Companies in lower-tech sectors may take years to fully integrate AI, requiring substantial investment and adaptation. For investors, this means patience—and a focus on sectors poised for long-term growth.
So, where do you see AI making the biggest impact? Is it in the factories of the future, the operating rooms of hospitals, or somewhere else entirely? The answer might just reshape the economy—and your portfolio—for decades to come.