Morgan Stanley Technology, Media and Telecom | Barcelona 2025

Spending on services, travel, concerts, and other experiential spend continues to be quite durable. The one area of some incremental weakness we are hearing about is around discretionary goods, where digital platforms and retailers are seeing more weakness. That is the area we need to pay most attention to as we go throughout the Spring and into the Summer to sort of determine how much consumer weakness we could have ahead. The overall generative AI theme, of course, came throughout the halls all week at TMT this year, most companies are now seeing improvements in efficiency when it comes to coding, customer service, other G&A and internal related expenses, and the signal on OpEx savings and structural efficiency improvements from generative AI continues to improve for large companies and smaller companies. And there are unresolved debates. I am sitting in a Waymo right now, the autonomous driving debate and what that means for the future of rideshare remains open. We have multiple cities to monitor throughout the course of the year to determine how autonomous driving and the rideshare players will play together. And in online travel, somewhat similar where the debate around the future of the consumer funnel within online travel, and whether or not we will have next generation AI agenetic products that may or may not displace the online travel agencies remains unresolved. It's Brian Nowak, Morgan Stanley's Head of U.S. Internet, from the back of an autonomous car riding through the streets of San Francisco.

As we wrap up the Morgan Stanley TMT Conference, one of the key conclusions is the increasing efficacy of generative AI, which gets me more positive on the space as we go into 2025. A lot of the vendors we're talking to expressed an increasing confidence in the ability of these generative AI products to drive real productivity gains for their end customers. Real productivity gains that the software vendors feel increasingly confident they’ll be able to monetize. On the other side of the equation, the software vendors are also utilizing more of this technology internally, driving real productivity gains for themselves when it comes to marketing, when it comes to their development efficiencies. I think the two of these are going to combine to drive both good top-line growth as these product cycles ramp, while at the same time we could see margins expanding. That one-two punch should drive better free cash flow growth for the group as we head through 2025, which keeps us positive on the software segment overall. I’m Keith Weiss and I cover the U.S. software space for Morgan Stanley research.

This year it’s all about the customer. So if you go back a couple of years, ChatGPT had launched, everyone wanted to talk about AI. Last year it was what investors wanted, which was cost cutting. This year in semiconductor presentations for enterprise software, course and consumer internet, media, what I'm hearing executives and CEOs talk about and get asked about is the customer and delivery. And this shows and means to me that we're on the precipice of an entirely new technology foundation where the best of the best is available to any business and how we differentiate and how to win is how you're going to bring that to your customer holistically and your trusted relationships with those customers. I'm Kate Claassen. I ran our global Internet Investment Banking Group at Morgan Stanley.

So here in San Francisco at our TMT Conference, obviously AI proliferation and adoption of technology and driving efficiencies has been one of the biggest themes. I'd say there's been three other interesting trends that we've picked up that I thought were worth highlighting. First, autonomous vehicles are everywhere. Walk around the streets of San Francisco and you see driverless cars on the roads. And we heard from several rideshare companies who made the case that they think it's going to be a hybrid world for a while. They think that fleet management, their networks, their liquidity are essential parts of the ecosystem, and it's not going to be fully autonomous for a number of years. Second big thing I thought was interesting was on the sports betting front. We heard from a number of operators there. They saw a little bit of weakness around the NFL season at the end of last year that obviously culminated with the Super Bowl, which was a big positive event for the sports betting industry. And they also flagged that the NBA is seeing an uptick in interest around some trades in the space, like the big Luka Dončić trade. So you've seen an increase in both handle and better sports outcomes for the sports betting players. And lastly, somewhat surprising, the pet industry is seeing a bit of a resurgence and active customer growth in a number of online pet stores are actually seeing an acceleration. So after years of Covid slow down, we're actually seeing pet adoption trends improve. I'm Sean Diffley and I cover TMT sector sales and institutional equities at Morgan Stanley.

I've been coming to this conference for over 20 years, and the tone is really fantastic this year. I'd say this is the most dynamic and innovative time I've ever seen coming to this conference, and really it all ties to AI. I really think about AI in three different buckets. One, traditional AI and machine learning, two, generative AI and three, agentic AI. And all three of these together will have profound impacts on the economy in the coming years. The reality on the ground is that enterprise software vendors are the ones that are delivering AI into enterprises across all sectors. Investors are trying to get their arms around the AI opportunity and who the winners will be in the coming years. I'm Brett Klein. I run our Technology Investment Banking team in New York.