Catenaa, Wednesday, February 25, 2026- Excessive selloffs across sectors triggered by fears of AI disruption create opportunities for stock pickers, Morgan Stanley Strategists say.

Investors should seek out what the team referred to as AI incumbents, strong growers, and high-quality names to take advantage of lower prices and momentum behind the adoption of the technology. The investment case for AI adopters with high pricing power continues to strengthen, strategists, including Andrew Pauker, said.

“Nearer-term AI adoption tailwinds help to offset longer-term disruption fears for impacted areas and for the overall market,” Pauker wrote.

While software has been among the sectors hardest hit by investor panic, the strategists said the market seemed to have assumed incumbents won’t be able to take advantage of AI innovation.

Instead, they see AI expanding the addressable market for enterprise software, with the Morgan Stanley analysts seeing “attractive entry points” for the likes of Microsoft, Intuit, and Atlassian.

Banks are set to be net AI beneficiaries, as the technology boosts productivity and earnings over time, the Morgan Stanley team said.

They listed Citigroup, Bank of America, State Street, and Truist Financial as the “most defensible” picks by analysts at the bank.

Among other sectors, the strategists also see consumer finance stocks as net beneficiaries of AI, with short-term disruption outweighed by eventual efficiency gains.

In insurance, AI should gradually improve brokering, but complex contracts, regulation, and compliance are unlikely to face near-term disruption, they said.

In payments and fintech, the strategists see Mastercard and Visa as net beneficiaries of AI and agentic commerce.

“What’s going on now is typical of a major investment cycle,” Pauker and his colleagues wrote. “Volatility bands tend to widen, and there are intermittent periods along the way where markets question both the pace of capital spending and which areas of the market could be disrupted.”