Skip to main content
logo
  • Investment Strategies
    Overview

    Investment Options

    • Alternatives
    • Beta Strategies
    • Equities
    • Fixed Income
    • Multi-Asset Solutions

    Capabilities & Solutions

    • Pension Strategy & Analytics
    • Global Insurance Solutions
    • Outsourced CIO
    • Sustainable investing
  • Insights
    Overview

    Market Insights

    • Market Insights Overview
    • Eye on the Market
    • Guide to the Markets
    • Guide to Alternatives
    • Market Updates
    • The Canada Economic and Market Update

    Portfolio Insights

    • Portfolio Insights Overview
    • Alternatives
    • Asset Class Views
    • Currency
    • Equity
    • Fixed Income
    • Long-Term Capital Market Assumptions
    • Strategic Investment Advisory Group
    • Multi-Asset Solutions Strategy Report
  • Resources
    Overview
    • Center for Investment Excellence Podcasts
    • Events & Webcasts
    • Insights App
    • Library
    • NEW: Morgan Institutional
  • About Us
    Overview
    • Diversity, Opportunity & Inclusion
    • Spectrum: Our Investment Platform
    • Our Leadership Team
  • Contact Us
  • English
  • Role
  • Country
Morgan Institutional
Search
Menu
Search
You are about to leave the site Close
J.P. Morgan Asset Management’s website and/or mobile terms, privacy and security policies don't apply to the site or app you're about to visit. Please review its terms, privacy and security policies to see how they apply to you. J.P. Morgan Asset Management isn’t responsible for (and doesn't provide) any products, services or content at this third-party site or app, except for products and services that explicitly carry the J.P. Morgan Asset Management name.
CONTINUE Go Back

As companies allocate larger budgets towards AI models and agent-building tools, the focus is on where those dollars flow.

The early innings of the AI buildout have been defined by building AI compute and capacity, where hardware (i.e. chip) companies have been clear winners. Moving forward, the AI wave will increasingly depend on utilization--how effectively companies convert AI investments into productivity and profit. That transition places software at the center, a sector whose performance has lagged hardware and where AI monetization remains diffuse. Whether the next leg of opportunity comes from software, and what companies within software, will depend on two key frictions: integrating AI into enterprise workflows and finding sustainable ways to charge for it once it's there.

The AI value chain in software

The software “stack” can be divided into three layers: infrastructure, platform and applications1. Infrastructure providers such as Microsoft Azure and AWS supply the compute power and model-hosting services that underpin the AI economy. Returns here are already visible, with Azure revenues accelerating 20+% year-over-year, though continued utilization growth will be necessary.

Further up the stack, platform and applications face the tougher hurdle of integrating AI into enterprise workflows and proving value. While 44% of U.S. firms now pay for some form of AI model or service, much of that spending flows to general-purpose models like ChatGPT and Claude, rather than tailored enterprise applications2.

Businesses face three primary hurdles to deeper AI integration:

  1. Workflow ambiguity. Most firms still don’t know which business functions merit dedicated AI spend. Productivity gains are clear in coding and documentation tasks, but broader process integration remains difficult.
  2. Data readiness. Many organizations are still cleaning and organizing data to make it usable for AI systems.
  3. Data privacy and security. Especially in regulated industries, firms remain hesitant to expose proprietary data to cloud-based models, limiting the adoption of commercial AI tools.

Even as adoption grows, monetization remains nascent. Software companies are testing a range of pricing strategies—embedding AI into existing bundles, raising base prices or shifting toward consumption-based models. Amid this uncertainty, the eventual returns on AI applications are difficult to forecast, as are the likely winners.

The race to capture AI’s value

With monetization and business models still forming, the next question is one of value capture. Who stands to benefit as enterprise adoption deepens? For investors, the key question is whether incumbents can successfully reinvent themselves, or whether, as in past technology cycles, new entrants will capture greater share.

Incumbents such as Microsoft and Oracle have the advantages of scale, distribution and data access that power AI workflows and applications. Yet incumbency brings challenges too: legacy architectures, customer expectations for predictability and pricing concessions and pressure to sustain margins.

AI-native startups are more agile but face steep hurdles in acquiring customers and data access and distribution. Startups are burning significant capital3, not just on product development and R&D but also marketing and sales.

For now, AI software remains a story of broad adoption but narrow monetization. As companies allocate larger budgets towards AI models and agent-building tools, the focus is on where those dollars flow. Not all use cases will ramp at the same speed, but early patterns will reveal where durable value is forming, with incumbents extending their lead or upstarts capturing the next phase of AI growth.

1 Infrastructure software provides the computing and storage resources that support other platforms. Platform software offers tools to build and analyze other software, such as coding, data or application development. Application software performs end-user functions, with examples such as Microsoft Office and Adobe Photoshop.
2 Source: RAMP AI Index.
3 The median Series A AI company reportedly burns roughly $5 to gain $1 in new revenue, which is higher than other sectors. Source: Silicon Valley Bank, State of the Markets report, August 5, 2025. 
 
5d0bc45b-ab79-11f0-bb59-bf6b5968eee9
  • Artificial Intelligence
  • Technology
J.P. Morgan Asset Management

  • About us
  • Investment stewardship
  • Privacy policy
  • Cookie policy
  • Sitemap
  • Conflicts of interest disclosure
  • Quebec Complaints Handling Process Summary
J.P. Morgan

  • J.P. Morgan
  • JPMorgan Chase
  • Chase

READ IMPORTANT LEGAL INFORMATION. CLICK HERE >

The value of investments may go down as well as up and investors may not get back the full amount invested.

Copyright 2025 JPMorgan Chase & Co. All rights reserved.