Morgan Stanley’s (MS) AI and IPO Tailwinds Could Drive a Bullish Breakout

Morgan Stanley’s MS -0.22% ▼ artificial intelligence (AI) infrastructure and initial public offering (IPO) revival are becoming compelling setups in big-bank equities. The markets remain distracted by rate uncertainty, the ongoing war, and fading mega-cap momentum. Yet, Morgan Stanley is gaining exposure to two powerful tailwinds: a trillion-dollar AI capital cycle and a long-awaited reopening in deal activity. This is starting to translate into robust fee revenue, stronger earnings leverage, and a more attractive valuation story than many investors appreciate.

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If those trends continue building through the year, the recent pullback may be a great buying opportunity. Thus, I am bullish on MS stock.

The Trillion-Dollar Pivot

For the last two years, investor attention has focused on the companies designing the chips that power AI. That focus is now shifting to the infrastructure required to support them. As the world moves into what could be a massive AI infrastructure build-out, Morgan Stanley appears well-positioned to benefit.

This opportunity extends well beyond data centers alone and includes large-scale project financing, cross-border energy transactions, and customized capital structures needed to fund increasingly complex developments. In that context, the firm’s advisory resurgence looks credible, particularly given its positioning to play a central role in this broader reallocation of capital.

What stands out is that this backlog is finally beginning to show up in reported results. For a while, many of these opportunities existed mainly as high-level strategic discussions, but as macro conditions have started to stabilize this spring, large infrastructure mandates are increasingly converting into actual fee revenue. What we are seeing is a shift from speculative AI enthusiasm to tangible, execution-driven investment banking activity. With a $1 trillion tailwind behind the theme, the firm simply needs to be in position when these large transactions move from discussions to signed agreements.

The IPO Market Is Making a Comeback

The IPO market has been dead for a while, but it finally feels like it may be opening back up. A sizable backlog of private, high-growth companies, especially in sectors like cybersecurity and clean technology, still needs access to public capital, and that demand has been building for some time.

Morgan Stanley’s investment banking platform is set to benefit from that shift, with a meaningful pipeline of mandates that could convert into revenue as issuance activity improves. If the market remains constructive, this could mark the beginning of a broader pickup in deal flow, rather than just a short-lived reopening that I’ve heard bears speculate about.

This could be more than a simple lift to Q2 results and may instead mark a broader inflection in activity. A reopening of the IPO market typically has spillover effects across capital markets and mergers and acquisitions (M&As), as public listings improve access to capital and give companies a stronger strategic position for acquisitions and dealmaking. Morgan Stanley seems well prepared for that shift, having worked with clients through the downturn and into what may be a more constructive issuance environment.

If several delayed transactions close within the quarter, Q2 results could come in well ahead of expectations.

A Rare Discount on a Growing Earnings Story

Morgan Stanley shares have taken a bit of a breather lately, dipping from their 52-week highs of $193 down to around $166. To me, that’s a gift. Morgan Stanley is currently trading at around 15x this year’s expected earnings per share (EPS) of $11.41. Given that this implies roughly 12% growth over 2025, the valuation already looks quite attractive. Also, with Wall Street still modeling only single-digit growth for 2027, there is a good chance expectations remain too conservative relative to the broader earnings potential.

I’m firmly in the camp that we see double-digit EPS growth through the end of the decade, and here is why. First, Wealth Management margins are on the rise due to a “double whammy”: the integration of AI-augmented advisory tools is lowering the cost to serve. Also, the acquisition of platforms like EquityZen has opened up the high-margin world of pre-IPO private markets to their massive retail client base. Secondly, the sheer volume of Private Equity “exits” that need to happen this year will create fee velocity that most analysts haven’t modeled yet.

Is MS Stock a Buy, Sell, or Hold?

Following the stock’s recent pullback, Morgan Stanley still has a Moderate Buy consensus rating on Wall Street, based on four Buy and eight Hold ratings. Notably, no analyst rates the stock a Sell. In addition, MS’s average price target of $195.50 implies roughly 18% upside potential over the next 12 months.

Final Thoughts

The case against Morgan Stanley seems rather weak. AI infrastructure is turning into a real driver of demand, and the deal pipeline is no longer just something to talk about. In fact, some of it is actually coming through in revenue now. To me, the stock still looks like one of the more attractive setups in the sector, especially at these levels.

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