AI emerged as key theme at Morgan Stanley’s industrials conference

Investors have reaped rewards from stocks in technology companies that are helping to drive adoption of artificial intelligence. Other kinds of companies including those in the industrial sector are poised to benefit from the build-out of AI data centers or by improving their operations with AI tools, analysts at Morgan Stanley said Thursday.

The financial-services firm this month hosted its yearly industrials conference in Laguna Beach, California, where it observed that “AI came up from both an adoption standpoint and as a driver of growth for companies with exposure to AI infrastructure,” as mentioned in a Sept. 19 report.

Because data centers need reliable ventilation and cooling to run efficiently, companies that make heating, ventilation and air-conditioning equipment have a growth opportunity.

Among the companies that presented fireside chats at the conference, Carrier Global (NYSE:CARR) and Trane Technologies (NYSE:TT) are two companies with exposure to commercial HVAC and data-center construction, according to Morgan Stanley.

Makers of other kinds of industrial equipment such as pumps and power control also have a chance to participate in data-center growth.

“Gates (NYSE:GTES) also sees data centers as a growth opportunity given the product offerings in both conveyance hoses and electrical water pumps for liquid cooling applications,” Michelle Weaver, equity strategist at Morgan Stanley, said in the report. “Hubbell (NYSE:HUBB) also spoke to strong data center demand for electricals.”

Other industrial companies were notable for the adoption of AI, such as automotive seating maker Lear (NYSE:LEA) and aerospace and defense giant Lockheed Martin (NYSE:LMT).

Lear (LEA) is “already seeing benefits from automation. They anticipate reducing seating headcount by 8%,” according to Morgan Stanley. “Processing leather is an important part of manufacturing luxury seating and has historically been very labor intensive. They are using AI to scan cowhides to determine the optimal use for them and inventory them.”

As Lockheed (LMT) upgrades the hardware and software of F-35 fighter jets, the company is looking ahead to how AI will need greater processing power.

“AI will be a significant contributor to improving defense capabilities over the next few years; the company is allocating R&D to fund AI, autonomy and distributed cloud computing,” Morgan Stanley said about Lockheed (LMT).

Finally, carmakers such as Rivian (NASDAQ:RIVN), Lucid (NASDAQ:LCID) and Ford (NYSE:F) “placed a heavy emphasis on software capabilities and their tech edge,” according to Morgan Stanley.

Software capabilities are seen as a way of building loyalty with consumers who may be reluctant to switch platforms when buying a new car. Ford’s (F) commercial customers who subscribe to its Ford Pro service have seen lower ownership costs as on-board diagnostics help to maintain their vehicles better, the carmaker said at Morgan Stanley’s conference.