AI frenzy opens window for ‘quality’ investing

Binaya Dahal

Journalist

10 July 2026

Morgan Stanley Investment Management’s Anton Kryachok says today’s market presents an exciting opportunity for quality investing, as investor obsession with AI has led many to overlook some of the world’s highest-quality companies.

Kryachok, portfolio manager for the international equity team at $1.9 trillion asset manager, said while the businesses related to AI-infrastructure build-out have delivered exceptional performance over the past year, there are now entire pockets of quality companies trading at valuations “we would not have expected to see”.

“The market has taken a broad-brush approach to AI disruption,” he said.

“As a result, many high-quality businesses are now trading at valuation levels that compare favourably with the broader market despite exhibiting stronger profitability and more resilient earnings streams.”

Over the past 11 months, semiconductor companies returned more than 86%, and hardware businesses rose more than 65%. By contrast, software and IT services companies have fallen almost 10%.

Kryachok said this divergence has created an increasingly attractive opportunity among high-quality businesses impacted by broader concerns about AI disruption.

“Many businesses have been treated as potential losers simply because they operate in software, data or information-rich industries. Our view is that the reality is far more nuanced,” he said.

“Companies with proprietary data, embedded customer relationships and strong competitive advantages may actually emerge stronger as AI adoption accelerates.”

He added that opportunities also lie beyond the traditional technology sector, including on businesses operating in media and entertainment, as well as premium consumer discretionary segments.

“What unites these businesses isn’t the sector they operate in, but their ability to compound earnings over long periods of time,” he said.

“These are companies with strong franchises, resilient business models and durable competitive advantages that we believe position them well regardless of the economic or technological environment.”

Kryachok said holding shares of quality businesses at attractive valuations has consistently proven to be a successful long-term investment strategy.

“While the timing of the next market rotation is difficult to predict, we believe owning high-quality businesses at attractive valuations remains a reliable strategy to compound wealth over the long term,” he said.