Morgan Stanley Software: New Stack – A Rallying Cry for Software Coming Out of TMT
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Following its TMT conference, Morgan Stanley expresses increased confidence in the defensive characteristics of software infrastructure names against AI disruption. Management teams articulated three compelling reasons their platforms will not be displaced by AI coding agents: the massive scale and complexity of globally distributed, serverless infrastructure; the high total cost of ownership for customers attempting to build internally; and the availability and resilience provided by multi-cloud positioning.
The report introduces a forward-looking framework centered on building infrastructure that AI agents heavily consume. This agent-first paradigm requires dedicated compute environments, memory management, knowledge base access, and governance, creating significant opportunities for both data infrastructure and observability providers.
Snowflake delivered the most compelling conference presentation, with CEO Sridhar Ramaswamy demonstrating genuine urgency and acknowledging the software cost paradigm shift. The company's investments in Snowflake Intelligence and Cortex Code are framed as existential imperatives.
Morgan Stanley observes a notable decoupling of revenue growth from headcount expansion across the sector, with companies like Snowflake, Akamai, and Atlassian achieving accelerated growth while implementing targeted layoffs. Additionally, on-premise solutions are gaining renewed relevance in the AI era.
Top overweight-rated picks include Snowflake (target price $245), Akamai ($120), Datadog ($180), JFrog ($70), and MongoDB ($440). Akamai's emerging AI inference business has already secured $200 million in four-year contracts, with unit economics suggesting 30% long-term operating margins.