MS The Viewpoint Growing Evidence Confirms Recovery is Broadening Out Beyond AI

M August 11, 2026 08:25 PM GMT

Asia Economics | Asia Pacific Morgan Stanley Asia Limited Idea

Chetan Ahya Chief Asia Economist

Morgan Stanley Asia (Singapore) Pte.

Evidence Confirms Recovery is Derrick Y Kam Asia Economist

Broadening Out Beyond AI Morgan Stanley Asia Limited

Jonathan Cheung Economist Exports, capex and consumer spending data show that the Kelly Wang growth trend is broadening out well beyond AI. We expect non- Economist tech exports and non-tech capex to lift the labour market Morgan Stanley India Company Private Limited further and drive an acceleration in consumption growth. Sudhanshu Agarwal Economist Key Takeaways Investors have been skeptical about this recovery cycle broadening beyond AI.

Over the last three months, we have seen more evidence of the recovery broadening out. We offer three pieces of evidence.

First, while semis exports are still very strong, non-semis non-AI related exports are picking up in a broad-based manner and are at an eight-year high.

Second, as non-AI related capex accelerates, capital goods imports outside of tech are showing strength.

Finally, consumption is continuing to improve gradually, and we expect non-tech exports and capex to drive further acceleration.

In this report, we present evidence of how Asia’s growth story is broadening beyond AI.

Exhibit 1: Non-AI related exports Exhibit 2: On a sequential basis, non- growing at a 25% annualized pace AI related capital goods imports have since October been on a steady uptrend even before 125 Selected Asian economies* non-AI non-fuel exports (SA, Dec-24=100) LNY effect AI-related capital goods imports began 120 117

25% annualized rise in non- inflecting meaningfully 115 AI non-fuel exports since 160 110 Oct-25 when most of the Selected Asian economies* (SA, Dec-24=100) region signed trade deals 150 152 Capital goods imports 105 with the US Capital goods imports: AI-related 140 Capital goods imports: Non-AI related

Dec-24 Jan-25 Feb-25 Mar-25 Apr-25 May-25 Jun-25 Jul-25 Aug-25 Sep-25 Oct-25 Nov-25 Dec-25 Jan-26 Feb-26 Mar-26 Apr-26 May-26 Jun-26 100

Source: CEIC, Morgan Stanley Research; Note: *Due to sectoral 80

Dec-24 Jan-25 Feb-25 Mar-25 Apr-25 May-25 Jun-25 Jul-25 Aug-25 Sep-25 Oct-25 Nov-25 Dec-25 Jan-26 Feb-26 Mar-26 Apr-26 May-26 Jun-26 exports data availability issue, we include only China, India, Indonesia, Korea, Taiwan, Australia and Japan, which account for 76% of region’s exports. Jun-26 as estimates. Source: CEIC, Morgan Stanley Research; Note: *Due to sectoral exports data availability issue, we include only China, India, Indonesia, Korea, Malaysia, Taiwan, Australia and Japan.

For important disclosures, refer to the Disclosure Section, located at the end of this report.

Details Our thesis – this capex and industrial super-cycle is not just about AI

Asia is entering what we think will be its strongest industrial cycle since the mid-2000s, underpinned by a sustained, multi-year rise in capex (see Asia Economics: Headed Towards an Industrial Super-Cycle, 27 April 2026). The drivers are no longer confined to semiconductors. While AI and AI related infrastructure are important, energy investment, defense outlays and investment to secure industrial supply chains are also key pillars to what will sustain the region’s overall capex spending and the industrial super-cycle. What’s more, these will then create second-order demand for other products and create positive spillovers through the supply chain and lead to a broader industrial capex cycle too.

This dynamic matters especially for Asia because the region is the world’s largest industrial base, accounting for nearly half of global industrial value added, and sits at the center of supply chains needed for AI hardware, semiconductors, energy-transition inputs, defense equipment, intermediate goods, and capital goods. As global capex rises and Asia’s own domestic capex accelerates, the region stands to benefit twice: through stronger export demand and through a self-reinforcing domestic investment cycle that supports production, jobs, wages, consumption, and further capex.

We are confident that this will be a long-duration cycle

First, the drivers behind this capex cycle – AI, energy…