Recent market selloffs driven by fears of AI e disruption may actually present buying opportunities, according to strategists at Morgan Stanley.

The bank argues that excessive declines across sectors reflect investor anxiety rather than fundamental weakness, creating attractive entry points for selective investors.

AI Fear vs. AI Opportunity

Morgan Stanley strategist Andrew Pauker and his team say investors should focus on what they call “AI incumbents”, strong growth companies, and high-quality firms positioned to benefit from AI adoption.

“Nearer-term AI adoption tailwinds help to offset longer-term disruption fears,” Pauker wrote.

The strategists believe the current volatility is typical of major investment cycles, where markets question both the pace of capital spending and which industries could face disruption.

Software Selloff May Be Overdone

Software stocks have been among the hardest hit as investors worry that AI tools could replace traditional enterprise software.

However, Morgan Stanley disagrees with the assumption that incumbents cannot adapt. Instead, they argue AI could expand the addressable market for enterprise software companies.

The bank sees “attractive entry points” in names such as: Microsoft, Intuit, Atlassian

These companies are viewed as capable of integrating AI while maintaining pricing power.

Banks and Finance Seen as Net Beneficiaries

Morgan Stanley also expects financial institutions to benefit over time as AI improves productivity and operational efficiency.

Among the “most defensible” banking names highlighted by analysts: Citigroup, Bank of America, State Street, Truist Financial

In payments and fintech, Morgan Stanley sees AI and agent-driven commerce supporting long-term growth for: Mastercard, Visa

Volatility Is Part of the Cycle

The strategists emphasize that widening volatility bands are normal during transformative investment phases.

“What’s going on now is typical of a major investment cycle,” the team wrote.

While markets remain divided over whether AI spending is excessive or transformative, Morgan Stanley’s view is clear: short-term panic may offer long-term opportunity for disciplined stock pickers.

Disclosure: This article does not represent investment advice. The content and materials featured on this page are for educational purposes only.

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