Podcast Summary: Thoughts on the Market

Episode Title: Who’s Disrupting — and Funding — the AI Boom
Date: November 13, 2025
Host: Paul Walsh (A), Morgan Stanley's European Head of Research Product
Panelists:

• Adam Wood (B), Head of European Technology and Payments
• Emmett Kelly (C), Head of European Telco and Data Centers
• Lee Simpson (D), Head of European Technology

Overview

This episode, recorded live at Morgan Stanley's 25th TMT Europe conference in Barcelona, dives into the current state of AI disruption and investment, focusing on Europe’s position amid the global AI and data center boom. The panel explores investor sentiment, sectoral impacts, infrastructure bottlenecks, and comparative policy landscapes between Europe, the US, and China.

Key Discussion Points and Insights

The Shift in AI Sentiment: Opportunity to Disruption

• AI Perceptions Evolving
  Adam Wood notes a shift from initial optimism about generative AI's business benefits to heightened concern over potential disruption across tech sectors.

  • “We’ve gone…to how positive can Gen AI be for these companies?...to how disrupted are they going to be and how on earth are they going to fend off these challenges?” (01:01–01:21, Adam Wood)

• Difficulty in Measuring AI Impact

  • Investors are struggling to see tangible AI-driven revenues, especially in info services, IT services, and enterprise software, prompting more focus on risks rather than rewards.
  • “Today, you know, we're not seeing it and it's hard for analysts to point to evidence…And so investors naturally flip to, well, if there's no benefit, then surely we should focus on the risk.” (01:28–02:19, Adam Wood)

Sector-Specific Analysis

• IT Services:
  Perceived as most at risk due to business models based on labor arbitrage, now threatened by AI’s capacity to automate and displace labor.

  • “If Gen AI is a technology that…displaces labor…they’re going to have to make changes to their business model.” (02:29–02:48, Adam Wood)

• Infrastructure Services:
  In a “middle” risk position; facing immediate, identifiable competition from newly emerged revenue-generating companies leveraging AI.

• Enterprise Software:
  Still viewed as relatively resilient, as traditional frameworks for evaluating competitive advantage remain relevant despite AI’s rise.

  • “We don’t think we need to throw all of those things away just because we have Gen AI.” (03:36–03:53, Adam Wood)

Telco Sector: Limited AI Disruption (So Far)

• Hyperscaler Dominance:
  Emmett Kelly emphasizes that telcos remain strong in B2C but hyperscalers (big US cloud platforms) control 85% of the cloud market in Europe’s B2B sector.

  • “The telcos, what they're doing is they're actually reselling the hyperscale service under the telco brand name.” (04:19–05:22, Emmett Kelly)

• Potential Future Threats:
  Concerns linger about hyperscalers one day moving directly into B2C, possibly via cloudified or virtual networks.

Semiconductor and Tech Hardware: Adoption and Monetization

• Semiconductors as Enablers:
  Lee Simpson points out that even within semiconductor companies, AI is reshaping workflows, e.g., via “agent engineer” digital systems that speed up chip design and time-to-market.

  • “There is adoption inside semi's companies as well.…If you have that design flow, time, that time to market, so you're creating double the value for the client.” (05:33–06:20, Lee Simpson)

• Monetization Challenge:
  The industry’s key question is how to capture value and share it between providers and clients, echoing earlier themes of unclear near-term revenue.

Data Center Investments: Scale, Bottlenecks, and Geographic Contrasts

The Scale and Cost of Data Centers

• Enormity of US Investments:
  A Harvard study found that, excluding data center investments, current US economic growth would be flat—a testament to how critical this sector has become.

  • “This Harvard paper concluded that if you take out data center investments, US economic growth today is actually zero. That is how big the data center investments are.” (07:08–07:25, Emmett Kelly)

• Breakdown of Costs:

  • $35 million per megawatt to build, with $20–25 million on chips and $10 million on what Kelly calls the “picks and shovels”—real estate, construction, power, fiber, and physical equipment.
  • “There is no bubble in that area whatsoever.” (08:29–09:00, Emmett Kelly)

Europe’s Structural Challenges

• Power Shortages:
  Power—especially affordable, green power—is the most significant constraint.

  • “There is a shortage of power for these data centers.…it's not just about the availability of power, it's about the availability of green power.” (09:23–09:43, Emmett Kelly)

• Cost Pressures:
  Energy represents 40–45% of operating costs in European data centers.
  The UK, Ireland, and Germany face some of the world’s highest power prices.

• Capacity Gaps:
  Comparative figures at the end of 2024:

  • US: 35 GW capacity (+30% growth YoY)
  • China: 22 GW (+10%, limited by chip issues)
  • Europe: 7–8 GW (+10%, constrained by local bottlenecks)

• Regional Concentrations and Constraints:
  The FLAPD markets (Frankfurt, London, Amsterdam, Paris, Dublin) collectively dominate, but three of those are capacity-constrained:

  • Dublin: Data centers use 25% of national grid (45% in Dublin city); leads to moratoriums on new construction.

  • Amsterdam: Physical and regulatory limitations due to density.

  • Frankfurt: Impacted by the Ukraine conflict and resource constraints.

  • “An incredible statistic: data centers are using 25% of the Irish power grid compared to a global average of 3%.” (11:14–11:29, Emmett Kelly)

  • “In Dublin, data centers are using 45% of the Dublin grid.…so there's a moratorium in building data centers there.” (11:29–11:45, Emmett Kelly)

National Responses

• UK and France Making Moves:
  UK government actively targets investment and policy to attract data center and AI funding, moving from “middle lane into the fast lane.”
  President Macron in France’s 2025 AI summit drew “over 100 billion euros of AI and data center commitments.” (12:19–12:27, Emmett Kelly)

• Europe’s Announced Investments:
  Total €350 billion+ in AI infrastructure, but slow actualization and skepticism about speed of change post-Draghi report.

  • “What’s changed since? Yeah, absolutely nothing, unfortunately.” (12:48–12:50, Emmett Kelly)

US and China Pulling Ahead

• US Policy and Nuclear Power:
  The US is leveraging nuclear (Three Mile Island agreements), gas, and regulatory agility to power rapid growth: 35–50% projected capacity jump this year.

  • “Nuclear renaissance is absolutely huge. Now. What's underappreciated is actually Europe has got a massive nuclear power bank...But unfortunately, we're decommissioning some of our nuclear power.” (13:07–13:24, Emmett Kelly)

• Europe’s Relative Pace:
  10% capacity growth in data centers projected; “feels like the others are pulling away.”

• China Accelerating:
  Expected to hit ~30 GW capacity by end of next year, with growth rates picking up after resolving chip constraints.

Notable Quotes

• “If Gen AI is a technology that…displaces labor…they’re going to have to make changes to their business model.”
  — Adam Wood (02:29–02:48)

• “The telcos, what they're doing is they're actually reselling the hyperscale service under the telco brand name.”
  — Emmett Kelly (05:01–05:22)

• “There is adoption inside semi’s companies as well…an agent engineer. So like a digital engineer…enabling a faster time to market for the design flow on a chip.”
  — Lee Simpson (05:33–06:20)

• “This Harvard paper concluded that if you take out data center investments, US economic growth today is actually zero. That is how big the data center investments are.”
  — Emmett Kelly (07:08–07:25)

• “An incredible statistic: data centers are using 25% of the Irish power grid compared to a global average of 3%.”
  — Emmett Kelly (11:14–11:29)

Timestamps for Key Segments

• Introduction / Episode Theme: 00:02–01:01
• AI Disruption: Investor Sentiment & Sector Breakdown: 01:01–03:53
• Telco Sector Discussion: 03:53–05:22
• Tech Hardware & Semiconductors: 05:22–06:20
• Data Center Investment Dynamics: 06:20–12:37
• Europe vs. US/China: Policy and Capacity Race: 12:37–13:55
• Closing Remarks: 13:55–15:01

Memorable Moments

• The revelation that US economic growth is currently driven largely by data center investments (07:08–07:25).
• Startling data on Dublin’s grid, where data centers now use nearly half the city’s electricity (11:14–11:45).
• The playful embrace of industry acronyms—FLAPD vs. tech hardware sector’s own dense naming culture (10:46–11:14).
• Frustration with Europe’s slow pace, post-Draghi report: “What’s changed since? Yeah, absolutely nothing, unfortunately.” (12:48–12:50).

Final Thoughts

The episode underscores both the brisk pace and yawning divides in the global AI and data infrastructure boom. While Europe is not lacking in ambition or capital commitments, regulatory, structural, and cost headwinds make it difficult to match the rapid advances seen in the US and China. Changing investor sentiment, evolving competitive threats, and the complex web of energy and physical constraints set the stage for a dramatically shifting technology landscape in the years ahead.