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Morgan Stanley's research underscores a transformative era for physical AI and infrastructure, projecting a $25 trillion robot revenue market by 2050 as tech giants deploy data probes to overcome Moravec’s Paradox. This shift is supported by a massive expansion in US hyperscaler capex, which is expected to nearly double to $805 billion by 2026, driving US GDP growth to 2.3% and S&P 500 earnings growth to 23%. However, this expansion comes with significant supply chain costs; the new Vera Rubin (VR200) AI rack is priced at nearly $7.8 million, fueled by triple-digit price surges in memory (+435%) and PCBs (+233%). While the firm remains overweight on US equities due to resilient growth and a 38% year-over-year increase in corporate capex plans, it highlights inflation risks to bond markets if strategic spending remains inelastic. Geopolitical volatility in the Strait of Hormuz continues to disrupt tanker traffic and energy markets, adding a layer of uncertainty to the global outlook. Conversely, the UK labour market shows signs of cooling, with the jobless rate rising to 5% and pay growth subsiding to 3.04%, which may allow for future central bank flexibility despite downside risks to regional growth.

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