Lessons From the Five Innovation Waves Before AI | On the Markets | Global Investment Committee | May 2026 | Morgan Stanley

Lessons From the Five Innovation Waves Before AI

• Michael T. Gapen, Chief US Economist, Morgan Stanley & Co. LLC

• The current artificial intelligence (AI) wave has led to bothoptimism and pessimism: It promises faster productivity andeconomic growth but also raises concerns about job displacement, inequality and social upheaval. In assessing what AI may mean for the US economy, we look to the pastfor guidance. After all, as the saying goes, history may not repeat itself, but it often rhymes.

• Over the past 250 years, the US has experienced five major innovation waves:

• The First Industrial RevolutionSteam, railroads and steel
• Electrification and the internal combustion engine
• Electronics and aviation
• The internet and digital networks

Across these waves, a consistent pattern emerges between innovation and macroeconomic transformation:

• Transformative technologies initially disrupt labor marketsand financial systems, provoke political responses and wideninequality—but they ultimately raise productivity, expandoutput and fundamentally reshape the structure of theeconomy.A look at prior innovation waves (see charts) suggests thatwhile technological revolutions invariably bring short-termdisruptions and uncertainty, they also deliver significant longrun benefits.