Morgan Stanley's Latest View: Open-source models are not a nightmare for software companies; those vendors who control enterprise context and pricing power will prevail

According to Zhihu Finance APP, the usage of open-weight artificial intelligence (AI) models is continuously rising, and Morgan Stanley believes that companies such as CrowdStrike (CRWD.US), Datadog (DDOG.US), Microsoft (MSFT.US), and others will capitalize on this wave of industry benefits.

Morgan Stanley analysts wrote in a report to clients: “The prospects of adopting open-weight models are not just that models become cheaper, but also that the cost of producing effective intelligent capabilities is decreasing, while the volume of intelligent service usage is expected to rise sharply.”

The analysts also stated that, in addition to these three companies, Atlassian (TEAM.US), Cloudflare (NET.US), MongoDB (MDB.US), Nutanix (NTNX.US), Palantir (PLTR.US), Palo Alto Networks (PANW.US), SAP (SAP.US), and ServiceNow (NOW.US) are the “biggest beneficiaries of the rising adoption rates of open-weight models.”

Other companies that could benefit from the rise of open-weight models include Box (BOX.US), Salesforce (CRM.US), Manhattan Associates (MANH.US), Shopify (SHOP.US), and Toast (TOST.US).

The analysts further explained that open-weight models (which the bank asserts have lower costs, though this view remains debated) create “two distinctly different opportunities” for existing software enterprises: on one hand, they broaden the boundaries of commercially viable workflows; on the other, they enhance the value of vendors’ proprietary assets.

The analysts explained: “The first opportunity can drive higher product adoption and usage, though competitors can seize this as well. The second type of opportunity has higher barriers: as the cost of intelligent capability decreases, assets such as business context, trusted data, telemetry data, secure execution environment, transaction processing, and compliance controls become significantly more valuable to customers. As long as these capabilities are hard to replicate, vendors can maintain pricing power even as delivery costs drop, and may even increase prices as the value delivered to customers rises. Therefore, the biggest winners need both broad commercialization potential and pricing power, allowing them to retain some of the cost benefits rather than giving them all away through fierce price competition.”