Investing.com -- Efforts to advance physical artificial intelligence in the United States will depend on sustained cooperation with China, according to Morgan Stanley analysts.
The bank said in a note this week that despite recent easing of tariff tensions following Geneva trade talks, long-term U.S. ambitions in physical AI cannot succeed in isolation.
“China enjoys an enviable position in advanced ‘AI-adjacent’ manufacturing vis-a-vis the U.S., in our opinion,” Morgan Stanley wrote. “We would not be surprised to see significant areas of cooperation between U.S. and Chinese manufacturing firms involving Chinese-based technology manufactured on U.S. shores.”
The note highlighted Tesla (NASDAQ: TSLA ) as a possible leader in fostering this collaboration. “Tesla may be uniquely positioned” to facilitate a cooperative on-ramp of Chinese manufacturing technology into the U.S. market, the analysts said.
Morgan Stanley cautioned that trying to re-shore AI-related manufacturing without Chinese inputs would be “extraordinarily difficult” in the next five years.
“Competition does not have to mean isolation,” they added, emphasizing that rivalry between nations can coexist with industrial partnerships.
On trade tensions, the analysts questioned the durability of tariffs as a policy focus. “Are we even talking about tariffs by the end of the year?” they asked, arguing that “more pressing and strategic topics” could take precedence as AI shifts from digital domains to physical systems.
Morgan Stanley also noted that U.S. consumers are likely to continue demanding high-quality Chinese EVs.
“We are not aware of a single CEO of a Western auto company who believes that tariffs and trade barriers will permanently prevent the U.S. consumer from having access to superior Chinese EV technology,” they said.
Tesla remains Morgan Stanley’s “Top-Pick” in U.S. autos and a central name in its “Humanoid 100.”