Morgan Stanley's Heavyweight Report: Will Brain-Computer Interfaces Be the Next Major Medical Technology Opportunity?

Once only existed in science fiction novels, "mind control" is now rapidly approaching the real world.

According to a research report released by Morgan Stanley on the 9th, Brain-Computer Interface (BCI), the new star in the technology field, is expected to achieve commercialization within 5 years, illuminating the medical field.

From Parkinson's disease to depression, BCI directly connects the brain to external devices, allowing patients to control machines directly with their minds, with the potential to restore motor function, improve cognitive abilities, and even achieve deeper human-machine interactions.

Morgan Stanley stated that BCI technology could become a significant breakthrough in future medical technology, providing new treatment methods for patients with neurological diseases, and bringing about a $400 billion market opportunity.

In the future, as the technology matures and costs decrease, BCI may even enter the mass market, becoming a core component of the next generation of smart devices. This will completely revolutionize our way of interacting with the world.

What is BCI?

The sci-fi British series "Black Mirror" Season 3 Episode 2 "Playtest" tells a story: the protagonist Cooper participates in an advanced virtual reality (VR) game test. A receiver resembling a small mushroom is nailed into the back of his neck to connect to the game system.

By influencing the technology of brain consciousness imaging, the game makes Cooper's experience extremely real, to the point where he can hardly distinguish between the virtual world and the real world.

And this mushroom-like device can be understood as BCI. In simple terms, BCI is a technology that converts thoughts into actions by connecting the brain's electrical signals to external devices.

Every decision we make (even thinking) triggers billions of neurons simultaneously in our internal neural network. BCI utilizes all brain-generated electrical activities to drive output.

Morgan Stanley pointed out that BCI technology is not a new concept. In fact, its research history can be traced back to the 1920s.

Thanks to the advances in neuroscience and computing technology in recent years, the practical application of BCI technology is accelerating, especially companies like Musk's Neuralink, which are pushing this technology from concept to clinical trials.

In January 2024, the company successfully implanted the N1 chip into a patient named Noland Arbaugh for the first time. This patient lost all four limbs function due to a car accident in 2016. After the surgery, he was able to control the cursor on the computer through brain signals, and even play video games like "Mario Kart."

The Morgan Stanley report indicates that BCI technology is expected to be first applied to a range of neurological diseases such as Amyotrophic Lateral Sclerosis (ALS), stroke, spinal cord injury, Multiple Sclerosis (MS), and depression. This technology can directly convert brain activity into observable behaviors, such as moving robotic arms, controlling computer cursors, and even achieving complex limb recovery

USD 400 Billion Market Size, 10 Million Potential Patients

One of the most striking data points in Morgan Stanley's report is the potential size of the BCI technology market in the United States, estimated to reach USD 400 billion.

According to Morgan Stanley's analysis, in the early and mid-stages of the U.S. market, there are nearly 10 million potential BCI candidates.

The target users of early-stage BCI technology are mainly focused on approximately 2 million patients with severe upper limb disabilities or neurological disorders, and it is expected that these patients will be the first beneficiaries of BCI technology.

The size of this early-stage market is estimated to reach USD 80 billion, and as the technology matures and is more widely adopted, the potential market is expected to expand to more patients, driving further growth in the overall market size.

After the early commercialization of BCI, Morgan Stanley points out that a more meaningful expansion of the mid-term TAM is expected to occur around 2040, with the market size at this stage predicted to be around USD 320 billion.

Mid-term patients include approximately 800,000 stroke patients, over 1.1 million epilepsy patients, and 4.5 million depression patients, among others, with a total size about 2.5 times larger than the early-stage patient group. Morgan Stanley believes that this will be a core driver of market growth after the formative period.

Overall, we expect that BCI market's implant revenue (revenue obtained through the sale of implantable medical devices) between 2030 and 2045 will slightly exceed USD 12 billion, indicating a penetration rate of about 2.8%, with the number of implant recipients slightly below 270,000, while we believe the appropriate number of implant recipients is 9.7 million.

Commercial Applications Expected Within Five Years, Challenges Remain for BCI

The Morgan Stanley report suggests that BCI technology is expected to achieve commercial applications within the next five years, such as in the treatment of motor neuron diseases, strokes, spinal cord injuries, and more.

These patients share the commonality of severe limb disabilities caused by damage to the nervous system, and BCI technology will help these patients recover some functions by connecting the brain to external devices, potentially achieving the goal of independent living.

Morgan Stanley predicts that in the next five to ten years, BCI technology is also expected to expand into non-medical fields such as gaming, augmented reality, etc. With the maturity of the technology and the reduction in costs, BCI technology may no longer be limited to helping patients with neurological disorders, and may even enter the mass market, becoming a core component of the next generation of smart devices Despite the promising outlook for BCI technology, Morgan Stanley has also pointed out the current challenges.

First is the issue of technological maturity. While some companies have entered the stage of human clinical trials, there is still a long way to go before large-scale commercial applications.

Second is the regulatory issue. BCI technology involves invasive device implantation and collection of neural signals, requiring ensuring the safety and effectiveness of the devices, which necessitates strict clinical trials and approval processes.

In addition, the popularization of BCI technology also faces ethical and privacy issues. As this technology directly reads and processes brain signals, protecting user privacy has become a new challenge. Morgan Stanley believes that solving these issues will rely on the joint efforts of regulatory agencies, tech companies, and the academic community