AI’s Impact on Software, Networks and Marketing in Europe

Mario Draghi, former president of the European Central Bank, ignited debate among European corporates and investors in September 2024 with a landmark report urging greater innovation and competitiveness—particularly in technology, artificial intelligence and the energy transition—across Europe’s industries.

At Morgan Stanley’s 25th European Technology, Media & Telecom Conference, 600 investors and 160 corporates convened in Barcelona a year after the report’s publication to assess progress. A central theme was how companies measure up on two critical AI dimensions: implementation (the delivery of near-term ROI through cost reduction, productivity gains and process optimization) and disruption (the use of AI to reshape industries, creating new winners and displacing legacy business models).

To varying degrees, companies in attendance are making progress on both. “European TMT companies are applying AI to drive operational efficiency while positioning for industry transformation, targeting growth and long-term resilience,” said Enrique Perez-Hernandez, Global Co-Head of Technology Investment Banking at Morgan Stanley.

Panel discussions revealed how AI is reshaping software development, data architecture, infrastructure and marketing models across tech, telecom and media:

• In technology, conversations centered on AI’s best uses—from software generation that lowers barriers to in-house coding and shifts vendor economics, to AI-driven data architectures that integrate fragmented systems and quantify ROI.

• In telecom, the focus was on infrastructure for AI at scale—power-efficient compute fabrics, fiber connectivity and network modernization to handle new traffic patterns—alongside AI-enabled customer experience and cost efficiency.

• In media, executives highlighted extreme AI-driven transformation in marketing, where agentic solutions cut production costs and challenge traditional agency models, signaling a shift from time-based billing to output-based pricing.

How AI Is Reshaping Software, Data and Chip Design

Executives from European technology companies highlighted three areas where AI is delivering the most impact:

• Software Generation and Business Model Shifts: AI is lowering barriers to software development, letting companies bring more coding in-house and reduce their reliance on external vendors. This shift could pressure traditional software providers and labor-based models. One way that software companies are aiming to create value in this environment is by co-developing AI-driven applications with clients through development partner programs to create tailored solutions that harness AI.

• Data as the Strategic Core: Executives described data as a defensible asset, noting that companies providing customers with valuable insights are harder to displace. Enterprises are interested in AI-driven analytics to enable insights and embedded AI within data architecture to integrate fragmented systems. One software executive shared that clients want solutions that can measure an enterprise’s current performance against target benchmarks, highlight redundant software and identify integration gaps.

• Chip Design and Monetizing Speed: In semiconductors, AI is reshaping design processes through agent-based engineering tools that promise faster time-to-market for complex chips, creating new opportunities for chip design companies to determine how to monetize that advantage. 

Telco Networks for Tomorrow’s Traffic

European telecom operators are entering a pivotal phase marked by the potential for more industry consolidation—even as some regulatory headwinds persist—and the race to monetize 5G, with enterprise and consumer use cases expected to accelerate over the next four years. Against this backdrop, AI is emerging as a defining force in the telecom space. “AI is redefining the strategic priorities for Europe’s telco operators, from transforming network architecture and traffic management to improving customer experience and operational efficiency,” said Jean Abergel, Global Co-Head of Media & Communications Investment Banking at Morgan Stanley.

• Modern Networks for AI Traffic: Telcos need to prepare for a surge in AI-driven uplink traffic, according to executives at the conference. The rise of large language models and AI-enabled devices—such as smart glasses and body cams—will dramatically increase uplink traffic as users share images and video with chatbots and other AI systems. Current telecom networks weren’t designed for this type of demand. To stay ahead, operators need to modernize networks to handle richer, more frequent data uploads.

• AI Redefining Operations: Telecom companies are boosting Net Promoter Scores by using AI to prevent network issues and enhance customer experience through chatbots that resolve problems faster than human agents. AI-driven automation is also being utilized to improve efficiency in call centers and marketing analytics, reducing headcount while increasing productivity. Additionally, AI enables telcos to unlock power savings by putting networks into “microsleep,” which reduces energy consumption during low-traffic periods and quickly restores capacity as demand rises.

• Cyber Defense Partnerships and Sovereign Data Centers: Telecom executives highlighted these areas as among the most promising AI-driven opportunities. Defense companies are increasingly relying on telco operators to strengthen cyber resilience as digital warfare becomes a defining feature of modern conflict. At the same time, countries are prioritizing data center sovereignty, creating opportunities for telecom operators to enable AI solutions while providing the network backbone for localized cloud strategies.

AI and the New Economics of Media

As AI reshapes the media landscape, companies that are likely to gain a competitive advantage can help clients integrate AI in creative production, harness data for predictive insights and create cost savings and monetizable outcomes. Those clinging to legacy business models risk being left behind. “The message from industry leaders is clear: AI is transforming creativity, cutting marketing costs, reshaping agency business models and powering data-driven advertising for unprecedented precision,” said Kamal Chebaklo, Co-Head of EMEA Media & Communications Investment Banking at Morgan Stanley.

• AI Driving Extreme Transformation in Marketing: Media company executives noted that a big focus for European company boards is cost efficiency, which is driving down marketing budgets. Traditional ad agency models, which rely on time-based billing, are under pressure as brands shift to fast, AI-driven solutions. One executive cited an example: A campaign that once cost $2.5 million and took two months to shoot in Eastern Europe can now be produced in four weeks for $500,000 using AI tools. This shift is accelerating a move toward output-based pricing, in which agencies are paid for assets used rather than hours worked.

• Data-Driven Ads and Hyper-Personalized Content: Media companies are increasingly using AI to anticipate consumer needs with remarkable precision. One executive noted that AI tools now help brands identify the right audiences and partners—for example, connecting pet-care brands to people likely to buy a pet within 18 months and social media influencers followed by pet owners. Looking ahead, speakers emphasized that AI-driven media will enable unprecedented personalization. Agentic systems could create commercials or streaming content tailored to individual viewers, dynamically adapted based on their online behaviors.