Morgan Stanley: AI is speeding up deals in some sectors and upending valuations in others

Morgan Stanley believes that the global M&A market is holding up against both geopolitical tensions and expensive energy, as well as AI-related turbulence. According to Tom Miles, global co-head of M&A, companies continue to make deals because they are thinking not about the next quarter, but about long-term strategy.

Deals Have Not Cooled

The first quarter, according to Miles, was very active, although uncertainty accompanied the market throughout the period. His thesis is simple: companies are still obligated to seek growth, and deals remain one of the main tools for this.

In an interview with Bloomberg Deals, he recalled that after major upheavals—from the dot-com crash to the financial crisis and pandemic—business has repeatedly returned to consolidation. For boards of directors, the question is not whether there is noise in the market, but whether buying an asset will help create long-term value.

Miles separately emphasizes that what is happening cannot be explained by management's recklessness. According to him, corporate leaders and boards of directors carefully monitor daily changes, but make decisions based on available information and their strategic goals. If the inputs change, the plans will change too. So far, this has not happened: there are more dialogues between companies, and the M&A market itself, according to Morgan Stanley's assessment, remains fairly broad across sectors and geographies.

AI Has Split the Market

The main factor that both drives and restrains deals right now is artificial intelligence. Miles describes the situation as uneven: in some sectors, AI creates almost unprecedented demand, in others it breaks conventional business models.

The first effect is most pronounced where companies are building infrastructure for the new computing cycle. When the market urgently needs capacity, organic growth is no longer sufficient, and buying assets becomes the fastest way to expand presence.

"From the perspective of AI, these are two different stories,"

Miles said to describe the difference between sectors that are winning from the boom and those already feeling pressure.

Currently, demand for deals is strongest in directions related to expanding AI-related capacity:

• data centers and their surrounding infrastructure
• assets that help rapidly scale AI-related capacity
• cross-border purchases for growth and supply chain resilience
• deals as a way to quickly fill strategic gaps

But this story has a flip side. In software, AI has already become a factor in reassessing valuations: the market looks at software more cautiously, and buyers and sellers find it harder to agree on prices.

When a sector simultaneously experiences a technological shift and valuation reassessment, traditional M&A logic begins to falter. Therefore, AI doesn't just heat up the market—it makes it more fragmented: some segments accelerate while others go into waiting mode.

Energy and Borders

Another risk for deals is energy prices. Miles directly states that a prolonged period of expensive oil would inevitably impact companies' valuations and cost structures.

But at the time of the interview, the market had not yet built this effect into its baseline scenario, he said. Corporations instead assume that sharp spikes may be temporary and don't want to postpone strategic decisions that should work for years based on this.

At the same time, cross-border activity is growing. For international companies, deals outside the home market are no longer just a matter of expansion but also a way to make supply chains more resilient and efficient. Miles notes that the US remains the primary destination for such capital: it's a large and growing market where business is easier to conduct than in many other jurisdictions. Therefore, even amid turbulence, international buyers continue to view US assets as the foundation for the next stage of growth.

What This Means

From Morgan Stanley's statements, it follows that AI does not kill the M&A market but changes its logic. Money and interest concentrate where infrastructure needs to be built urgently and growth needs to be bought, while in vulnerable sectors like software, deals become more difficult due to disputes over valuation. For the market, this is a signal: the era of equally hot demand has ended, and now choosing the right segment is most important.