Agentic and sovereign AI: artificial intelligence comes of age

Unlike past structural shifts that unfolded over decades, the artificial intelligence (AI) revolution is set to transform economies in a matter of years. This next phase of AI’s rapid ascendancy will take the form of two paradigm shifts: the rise of agentic AI and the growing importance of sovereign AI. Their parallel evolution will have truly profound consequences for companies as well as for society. What are the investment implications? Our Asia High Conviction and Emerging High Conviction equities strategies consider how to position across the full AI value chain to capture value from foundational innovation through to monetisation.

A giant leap: from generative to agentic AI

To date, generative AI has largely served as a productivity tool for human workers. However, as the technology evolves, it will increasingly have the ability to replace them.

AI agents represent a new software paradigm. We expect 2026 to mark the onset of the era of ‘agentic AI’ characterised by four key attributes: interaction, connection, learning and autonomy. The ability of AI agents to both reason and act will make them capable of fulfilling entire roles formerly carried out by human employees across almost every industry and sector.

Despite mixed AI deployment, rapid progress is being made. Users report strong results and ROI from the successful deployment of AI, yet challenges persist around reliability, execution and precision. However, businesses that have fully integrated generative AI with memory and learning capabilities into their high-value workflows are seeing financial benefits.

Agentic AI is gaining the ability to plan and reflect. Development and implementation of agentic AI is progressing step-by-step from simple automation to full artificial general intelligence (AGI). AI agents are currently hovering around the threshold of Level 3 (Figure 1), demonstrating the ability to plan, iterate and adapt — capabilities that will materially expand the universe of viable use cases.

Monetisation of AI is underway. Having driven substantial capex, AI must increasingly demonstrate sustainable returns to justify successive waves of investment. The technology is quickly evolving into a commercial ecosystem, with Morgan Stanley forecasting positive ROI from generative AI by 2027 and revenue surpassing USD 1 trillion in 2028.

Fig 1. Levels of agentic automation¹

Read more: Asia and EM in 2026: accelerating momentum in credit and equities

AI as a political imperative: the rise of sovereign AI

The rising importance of AI for the integrity and wellbeing of nation states will put the technology and its development at the centre of government policy. 

The economic and societal impact of AI may be highly disruptive. The so-called ‘San Francisco Consensus’, shared by many tech leaders, holds that AI will fundamentally transform all aspects of human activity, redefining productivity, employment and competitive advantage. The boldest believe this paradigm shift could be here within just three-to-six years, raising the risk of unemployment and social disruption if not managed effectively.

AI sovereignty is becoming a strategic imperative. Avoiding effectively paying an ‘AI tax’ through reliance on US or Chinese technology will be critical. More fundamentally, governments will view control over AI as essential to safeguarding national interests and managing the resultant economic and social challenges it will bring. The desire for representation and inclusivity will be a further factor driving a focus on sovereign AI.

Increased AI adoption will create policy challenges. Around a quarter of today’s jobs are already being touched by AI; according to Morgan Stanley estimates, in just three years that could rise to 44%. The speed of change means governments must act quickly and decisively, investing heavily not just in digital infrastructure but in talent development and ecosystem building to ensure sustainable innovation and competitiveness. 

Broader and deeper: investment implications

From an investment perspective, agentic and sovereign AI represent both an opportunity and a threat, at the company as well as the country level. 

Businesses must move from adoption to true integration. We believe the next wave of upside will come from companies that shift from small-scale adoption to full integration with their core business. Large language models (LLMs) themselves are no longer a durable moat; differentiation increasingly depends on proprietary datasets, appealing products and effective workflow integration. We believe the likely winners will be companies that can convert their models into sticky products with defensible economics.

AI infrastructure development is entering a self-reinforcing cycle. Rising return on investment (ROI) suggests infrastructure investment will continue, albeit with some cyclicality. Meanwhile, the commercialisation of physical AI – through robotics and autonomous driving – creates additional avenues for growth. 

Asia plays a critical role in the AI value chain. Beyond its dominance in the  global chip supply, the region is integral to the broader infrastructure that enables AI deployment at scale. Our Asia High Conviction equities strategy is positioned across the full AI value chain from infrastructure to applications – enabling us to capture value from foundational innovation through to revenue generation.

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Tapping into the full AI value chain

Asian technology – including AI and the tech supercycle – is a core theme across our Asia High Conviction and Emerging Market High Conviction portfolios. Our investment strategies target high-conviction exposure to scalable, defensible assets with clear monetisation and strategic relevance. We favour consumer-focused companies using AI to drive commercialisation and growth, alongside critical AI enablers that support adoption from foundational innovation through to end-users.

Agentic and sovereign AI signal a structural shift from experimentation to integration, with clear implications for productivity, competitiveness and capital allocation. We believe investors positioned across the most defensible parts of the AI value chain – particularly where innovation translates into durable earnings – are best placed to capture the next phase of returns.