Morgan Stanley warns a major AI breakthrough will happen in 2026 that the world isn't ready for

Morgan Stanley has warned of a major AI breakthrough that most companies are ‘not prepared for,’ and it could be coming sooner than you’d think. 

In recent years, we’ve seen artificial intelligence, or AI, make huge improvements over relatively short periods of time. 

Now, banking giant Morgan Stanley has predicted that large language models will make another huge breakthrough that will increase AI capabilities.

The bank has also warned that companies aren’t ready for this next round of AI disruption.

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Morgan Stanley has predicted the big AI breakthrough could happen soon

A few years back, the best AI could manage was generating a somewhat terrifying video of Will Smith eating a plate of spaghetti. 

But these days, AI is being used by millions of people and has been introduced across a whole host of industries, from medicine to car-making. 

According to Fortune, the recently released OpenAI GPT-5.4 ‘thinking’ model has achieved an 83 percent score on the GDPVal benchmark – a test designed to evaluate AI’s performance on an economically valuable task.  

With the tech moving as fast as it is, Morgan Stanley has sent a message out to clients predicting another upcoming AI breakthrough. 

The bank recently held its TMT conference, where several AI bosses warned that upcoming LLM improvements could shock investors. 

Speaking back in February, OpenAI CEO Sam Altman said that ‘extremely capable’ AI models were just around the corner. 

“The world is not prepared,” he said. 

“[W]e are going to have extremely capable models soon. It’s going to be a faster takeoff than I originally thought.”

In a similar warning to clients last week, Morgan Stanley predicted a big jump in AI capabilities – and suggested it could be here sooner, rather than later. 

“The market is not prepared for the non-linear increase in LLM capabilities, which, in our view, will become evident in April-June,” the bank said.

The bank has predicted that trillions will be spent on AI-infrastructure

To help keep up with demand, Morgan Stanley estimated that almost $3 trillion will be spent on AI-related infrastructure in the next couple of years. 

“Morgan Stanley Research estimates $2.9 trillion in global data center construction cost alone through 2028, fueled by sustained demand for compute that vastly exceeds supply,” the bank said. 

It also said that more than 80 percent of that spending is still to come, meaning AI-infrastructure is set to explode in the next couple of years. 

Timeline of key AI breakthrough moments

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