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MONEY MANAGERS' AI-DRIVEN SELLOFF OVERDONE, SAYS MORGAN STANLEY

A pattern has emerged in the last few weeks. An AI-driven challenger emerges in a sector, stocks sell off sharply, and then sellside analysts start explaining why the selloff was overdone.

What we don't know yet is the next stage in the cycle. Do the sellside decide actually the kneejerk reaction was correct, or does the market bounce back?

Anyway, it's too soon to answer any of that, but after shares of U.S. and European money managers fell sharply this week, on concerns AI-first startups will undermine existing business models, Morgan Stanley has a note out Thursday saying it "looks excessive".

They say, and again this feels a bit familiar, there are various opportunities from AI for European platforms and wealth managers.

"By automating routine client facing and administrative tasks, Gen AI could enable advisers to deploy data more effectively, deepen client relationships and scale their client base without additional resources, ultimately supporting higher value engagement and revenue generation".

The question is who can do that well, and who can't.

They flag Fineco FBK.MI whose shares fell 9% on Wednesday as one example, given what they describe as "the depth of the technology capabilities already embedded in Fineco’s platform".

While they have underweight ratings on both UBS and Julius Baer, they say, they view the "weakness caused by AI newsflow as premature; we believe the human touch and connection with clients remains important, especially in the higher end of the wealth spectrum."

(Alun John)

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