Thematic Alpha Thematic Thoughts Best Ideas from the Indu...-110347751

M IdeaThematic Alpha | North AmericaThematic Thoughts & Best Ideas from the Industrials ConferenceMorgan Stanley & Co. LLCMichelle M. Weaver, CFAEquity Strategist Michelle.M.Weaver@morganstanley.com +1 212 296-5254 Michael J WilsonEquity Strategist M.Wilson@morganstanley.com +1 212 761-2532 Andrew B PaukerEquity Strategist Andrew.Pauker@morganstanley.com +1 212 761-1330 Diane Ding, Ph.D.Quantitative Strategist Qian.Ding@morganstanley.com +1 212 761-6758 Nicholas Lentini, CFAEquity Strategist Nick.Lentini@morganstanley.com +1 212 761-5863 Adam Jonas, CFAEquity Analyst Adam.Jonas@morganstanley.com +1 212 761-1726 Angel CastilloEquity Analyst Angel.Castillo@morganstanley.com +1 212 761-1931 Carlos De AlbaEquity Analyst Carlos.De.Alba@morganstanley.com +1 212 761-4927 Christopher Snyder, CFAEquity Analyst Chris.Snyder@morganstanley.com +1 212 761-4470 Kristine T LiwagEquity Analyst Kristine.Liwag@morganstanley.com +1 212 761-2980 Ravi ShankerEquity Analyst Ravi.Shanker@morganstanley.com +1 212 761-6350 Vincent AndrewsEquity Analyst Vincent.Andrews@morganstanley.com +1 212 761-3293 Technology Diffusion and AI opportunities, a mixed message on the health of the US consumer, and debate around the future of electric vehicles emerged as key themes during the Industrials Conference. Last week, Morgan Stanley hosted its annual Industrials Conference in Laguna. The overall tone of the conference was better than feared. Several key themes emerged throughout fireside presentations:1. Tech Diffusion & AI. AI was discussed from both an adoption standpoint and as a driver of growth for companies with exposure to AI infrastructure. AI driven demand for data center cooling is an important growth opportunity for multi-industry companies with exposure. Lockheed Martin noted that AI will be significant contributor to improving defense capabilities over next few years. Several auto companies, including Rivian, Lucid, and Ford, placed a heavy emphasis on software capabilities and their technology driven edge.2. Mixed read through on the health of the US consumer. Demand remains full steam ahead for airlines with executives across the space characterizing demand as "great" even as other areas of discretionary spending slow. Auto dealerships are not seeing signs of deteriorating credit though Penske Automotive Group and Group 1 are more exposed to higher end consumers. Heartland Express called out weak consumer demand likely persisting through the election and Stanley Black & Decker noted weak consumer demand for tools as rates remain elevated.3. The Future of Electric Vehicles. The debate around the future of EVs came up repeatedly amid lagging EV demand in the US and the rise of a wide range of competitors in China. Cost remains a key issue for consumers and we are not likely to see demand pick up until prices come down. Demand for rental EVs remains weak as users have range anxiety and do not want to worry about finding charging s