New Delhi, Sept. 28 -- The artificial intelligence (AI) investment cycle could move from a hardware-led phase towards software and applications by 2028, as growth in spending by hyperscalers and cloud providers is expected to slow sharply, Morgan Stanley Research said in a report.

Morgan Stanley forecasts year-on-year growth in hyperscaler and neocloud capital expenditure to fall from 93 per cent in 2026 to 61 per cent in 2027 and 14 per cent in 2028. The brokerage said this points to a shift from heavy spending on chips and data-centre infrastructure towards software and AI applications.

"This indicates we could soon see a transition from hardware to software/services in 2028, and we expect this shift heading into next year as this is ...