Here are 3 AI themes investors should watch for as the tech craze broadens out to the rest of the market

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  • The AI craze is still going, and investors should be watching for new areas the tech could impact.

  • Morgan Stanley outlined three themes for investors to keep tabs on as the AI craze broadens out.

  • Strategists said they were bullish on stocks with the greatest upside for AI-driven productivity gains.

The frenzy for artificial intelligence will continue to spread across the market, and there are three key themes investors should be watching for to stay ahead of the curve, according to Morgan Stanley.

Strategists at the investment bank said they expect the AI craze to broaden out through 2025, bringing fresh opportunities for investors, who have already plowed their cash into mega-cap tech firms like Nvidia and Microsoft — key "enablers" of the AI craze, which have soared over the last four months.

"This is probably the next big productivity driver," Morgan Stanley's chief equity strategist Mike Wilson said to Bloomberg on Tuesday, though he noted the advancements from AI wouldn't strike the economy "immediately."

"The real opportunity though is going to be when this technology defuses across the economy … and that's very, very early days," he added.

Here are three opportunities investors should watch out for, according to Morgan Stanley strategists.

1. Smartphones

Personal devices, especially smartphones, will be a huge catalyst for AI as the technology becomes more mainstream. Companies in the space have already mentioned that they expect personal computers and other workstations the power the AI trend over the next decade, strategists said in a note on Tuesday.

"Nearer term, however, our analysts see the Smartphone supply chain as the least well-discounted and most catalyst-rich way to play the theme," the bank wrote.

2. Data centers

Companies like OpenAI have said they're looking to increase their energy efficiency as they develop generative AI technology. AI data centers could quadruple their share of total power consumption in Europe by 2035, strategists estimated.

"We have argued both globally and more specifically in Europe, for investors to be positioned for more upgraded data centre facilities to cope with the growing energy intensity of upcoming chips," the note said.

3. AI Adopters

While "enabler" AI stocks have soared in recent months, investors should also be paying attention to the "adopters" of AI tech, which are companies that are focused on using the tech to unlock productivity gains. AI assistance in areas like customer support and research & development could help corporate profits expand through the rest of the year and into 2025, the bank predicted.