Morgan Stanley's outlook for the top ten investment trends in 2025: nuclear energy revival, AI revolution in the financial industry, quantum computing, oral weight loss drugs...

In 2025, facing the rapidly changing global economy and markets, which investment themes are worth paying attention to? On the 9th, Morgan Stanley released the "2025 Top Ten Thematic Strategies," with the Edward Stanley team analyzing the important investment trends for the coming year. Morgan Stanley points out that historically, popular themes with strong profit momentum often have strong sustainability, such as artificial intelligence, defense spending, and obesity drugs. These themes have already had a profound impact on the market and it is expected that this impact will continue to expand throughout the year. Furthermore, some themes that have not yet received sufficient attention from investors may become increasingly important in 2025, such as negative electricity prices and quantum computing, which are expected to emerge as new investment hotspots. 1. India's Golden Decade Morgan Stanley expects the Indian economy to continue to be a bright spot among emerging markets in 2025. Due to strong domestic demand growth, India's Gross Domestic Product (GDP) growth rate is expected to reach 6.5%. The report points out that Indian businesses and financial sectors have sound balance sheets, while there is ample policy space, providing support for economic development. The recovery in consumer demand, improvement in rural economies, and growth in public and household capital expenditure will be the main drivers of India's economic growth. 2. Rise in European Defense Spending Morgan Stanley indicates that European defense spending is entering a phase of multi-year growth, with drivers including: making up for low investment over the past 30 years, reducing dependence on U.S. defense support, and replenishing military equipment inventories following the Russia-Ukraine conflict. Morgan Stanley predicts that to close the investment gap of the past, Europe would need to increase defense spending by over $2 trillion at current prices. Additionally, NATO allies may respond to U.S. demands by increasing their respective defense budget ratios, further deepening this trend. 3. Mergers and IPOs Resurgence With declining interest rates and improved capital market conditions, global mergers and IPO activities are expected to experience a resurgence. Morgan Stanley expects the announcement volume of mergers and acquisitions in 2025 to grow by 50% year-on-year. This is due to low interest rates, a strong stock market, and business confidence. A Republican victory in the presidential election could further push for regulatory relaxation, accelerating this trend. In Europe, a 49% year-on-year growth is expected to lead, while the U.S. has $4 trillion of "dry powder" (uninvested private equity funds) waiting to enter the market. Additionally, corporations hold $7.5 trillion in cash reserves, creating favorable conditions for mergers and IPOs. 4. Resurgence of U.S. Manufacturing The report states that the U.S. is in the early stages of re-industrialization, which presents a long-term economic opportunity of up to $10 trillion. The U.S. manufacturing sector has experienced significant decline over the past 20 years. While "reshoring to the U.S." is often thought to mean closing factories in Asia and then reopening alternative plants in the U.S., Morgan Stanley states that this is just one scenario. "We believe that the world needs to increase manufacturing capacity, and given its structural characteristics and importance of resilience, the U.S. is more capable of obtaining new factories than it has been in the past 40 years." Morgan Stanley points out that the U.S. is the least self-sufficient among the world's major economies, and this phenomenon is expected to improve over the next few decades. 5. Nuclear Renaissance Nuclear energy is being reconsidered due to its potential under decarbonization, energy security, and support from artificial intelligence technology. Morgan Stanley expects that by 2050, the share of nuclear power in global electricity supply will increase from 12% in 2022 to 17%. The development of small modular reactors (SMRs), innovation in nuclear energy financing models, and the drive towards carbon neutrality will create over $1.5 trillion in investment opportunities for the nuclear energy industry. "We believe the nuclear renaissance will follow five trends: COP28 goals, GenAI, financing, construction risks, and SMRs." 6. Rise of Negative Electricity Prices Phenomenon The European renewable energy market is facing an increasingly common challenge of negative electricity prices, and this trend is expected to continue with the continued growth in renewable energy installation capacity. Morgan Stanley believes that negative electricity prices pose a risk to renewable energy developers, but also bring opportunities for grid infrastructure construction. Morgan Stanley points out that enterprises able to adjust their electricity generation capacity flexibly (such as energy storage and smart grids) will benefit from this trend. For example, pumped hydro storage plants can store electricity when prices are negative and release it during peak pricing, benefiting from it. 7. AI Revolution in the Financial Industry The application of artificial intelligence in the financial industry is experiencing explosive growth. Morgan Stanley points out that banks and insurance companies are at the forefront of AI applications. In a recent analyst survey, 27% of financial companies achieved substantial business improvements due to AI applications. In the future, AI application scenarios in the financial sector will include risk management, automated customer service, and optimized investment advice, providing significant investment opportunities for financial stocks. 8. Preliminary Exploration of Quantum Computing Quantum computing is seen by Morgan Stanley as a "known unknown," with long-term implications that could be significant. While quantum computing is still in its early stages of development, the report suggests that businesses and governments need to plan in advance in related areas, such as post-quantum encryption technology, to address potential future network security threats. Additionally, quantum computing also presents investment opportunities in the telecommunications, satellite, and network infrastructure sectors. 9. Rise of AI Agent Technology Morgan Stanley states that generative AI has made significant breakthroughs in the past two years, and 2025 will see the development stage of AI agents (Agentic AI). This technology will enable AI to shift from passive response mode to a new stage of actively solving problems and improving productivity. For example, AI agents can predict user needs, automate tasks, and greatly increase efficiency for businesses and individuals. Morgan Stanley predicts that this trend will have trillions of dollars of economic impact on the enterprise software market.Market Potential of Oral Weight Loss Drugs The obesity drug market experienced a bottleneck in 2023 due to a shortage of injectable GLP-1 drugs. Morgan Stanley believes that the launch of oral GLP-1 drugs in 2025 will reignite market interest and may drive obesity drugs to become one of the largest single categories in the pharmaceutical industry history. Furthermore, the increase in consumer health consciousness will have a positive impact on investments in health foods and related fields. This article was reprinted from Wall Street Seen, GMTEight editor: Chen Xiaoyi.