AI’s Next Big Leap

The rapid, nonlinear advancement of AI capabilities is fundamentally reshaping business models and economic productivity. Scaling laws demonstrate that increasing training compute by 10x yields a 2x improvement in model performance, driving a massive, underappreciated disruption across industries. While concerns regarding capital expenditure persist, the economic ROI for enterprises is substantial; for example, a $5 investment in tokens can generate $55 in human labor savings. As the industry shifts from query-based interactions to agentic AI, token demand will likely explode, further tightening the supply of compute and power. Fast adopters are already realizing significant efficiency gains, such as the automation of software coding, signaling that the current infrastructure frenzy is justified by tangible, long-term economic value. Stephen Byrd, Global Head of Thematic and Sustainability Research at Morgan Stanley, provides these insights on the evolving AI landscape.