Why US-China Cooperation is Crucial for AI Manufacturing, According to Morgan Stanley

Morgan Stanley analysts recently pointed out that the future of physical artificial intelligence (AI) manufacturing in the U.S. heavily relies on ongoing cooperation with China.

Although there’s been some easing of tariff tensions between the two countries after trade talks in Geneva, they say that the U.S. cannot expect to achieve its long-term AI manufacturing goals alone.

They explain that China holds a strong position in advanced manufacturing related to AI compared to the U.S., which makes collaboration between American and Chinese manufacturers almost inevitable.

Tesla was mentioned specifically as a potential key player in bridging this cooperation, as it might be uniquely positioned to help introduce Chinese manufacturing technology into American markets.

Morgan Stanley also warned that trying to bring AI-related manufacturing entirely back to the U.S. without relying on Chinese technology would be extremely tough over the next five years.

An important note they made is that competition between countries doesn’t necessarily mean complete isolation, but can coexist with industrial partnerships.

Regarding tariffs, the analysts expressed some skepticism about their long-term role, wondering whether tariffs will even be a hot topic by the end of the year given that AI is shifting focus from software to physical systems.

Moreover, they highlighted that U.S. consumers will likely keep demanding high-quality electric vehicles (EVs) from China, regardless of tariffs or trade barriers.

They quoted that no Western auto CEO believes tariffs will permanently stop U.S. buyers from accessing superior Chinese EV technology.

As for Morgan Stanley’s investment view, Tesla remains their top pick in the U.S. auto sector and plays a central role in their 'Humanoid 100' list of companies related to AI and robotics.