FX168 Financial News (North America) reports that Wall Street is closely monitoring the large-scale capital expenditure plans of major technology companies for 2025, but Morgan Stanley pointed out on Wednesday (February 12) that another class of stocks will also benefit from the AI investment wave - the Retail Trade.
According to Morgan Stanley's analysis, the investment race among "hyperscale computing enterprises" in artificial intelligence (AI) is a bullish factor overlooked by the market, which may drive the growth of retail stocks such as Walmart (WMT.N) and Target (TGT.N).
Morgan Stanley Stocks Analyst Simeon Gutman stated, "The Retail Trade is at the forefront of the technological leap in AI, data, and automation. While retailers may not invest heavily in AI infrastructure as technology companies do, the surge in capital expenditure in the tech sector indicates that the Retail Trade is approaching a technological inflection point and should benefit from it."
Growth in AI capital expenditure will drive retailers to upgrade.
This year, Microsoft (MSFT.O), Amazon (AMZN.O), Google (GOOGL.O), and Meta (META.O), four tech giants, announced a total of $300 billion in AI investments. Although these investments seem unrelated to the Retail Trade, Morgan Stanley expects them to encourage retailers to increase capital expenditure, especially for those companies capable of investing.
This wave of AI investment will bring numerous opportunities for large retailers, such as:
Enhancing the in-store experience (a smarter shopping environment)
Optimizing advertising placements (using AI to enhance precise marketing)
Accelerate the automation process (improve supply chain and warehousing efficiency).
Morgan Stanley's analysis suggests that retailers capable of increasing investments will further expand their market share, a trend that may become evident in the upcoming Earnings Reports.
Morgan Stanley's analyst team emphasizes: "Larger companies will grow bigger and the pace of expansion will accelerate."
Capital expenditure in the Retail Trade industry is expected to reach 55 billion dollars.
Morgan Stanley predicts that capital expenditure in the Retail Trade industry will reach 55 billion dollars by 2025, an increase of about 7% year-on-year. Among these, Walmart, Costco (COST.O), Target, The Kroger (KR.N), and Home Depot (HD.N) will account for 69% of the total capital expenditures in the Retail Trade industry, covering durable goods, non-durable goods, and food retail.
Walmart will lead the industry, with projected capital expenditure of 22 billion dollars in 2025, four times higher than that of Costco.
Bank of America has set a target price of $110 for Walmart stocks, expecting its profitability to improve, while digital advertising and online marketplace business will drive growth.
Risk factors: Cheaper AI or reduced competition barriers for large enterprises.
Although Morgan Stanley holds a bullish outlook on the AI investment prospects of large retailers, Gutman pointed out that a potential risk is the declining costs of AI technology, which could allow small retailers to compete.
Recently, a low-cost AI developed by the Chinese company DeepSeek has garnered widespread attention, as its technological capabilities are thought to rival those of Silicon Valley giants. This has raised concerns in the market about the sustainability of large technology companies' AI investments, which previously led to a market cap evaporation of over a trillion dollars for technology stocks.
If AI innovations like DeepSeek can indeed significantly lower the cost of AI investments, then the beneficiaries would not only be smaller retailers but also companies in the software industry, potentially prompting investors to pay attention to investment opportunities in software stocks.
However, Gutman believes that this trend will not change in the short term: "Nevertheless, we believe that this situation will not occur in the short term; for now, retailers capable of investing in AI will continue to expand their market advantages."
