MARKETS LOOK BEYOND AI BUILDERS TO AI EARNERS
The market's AI narrative may be entering a new phase, with investors increasingly shifting their focus from the companies building artificial intelligence infrastructure to those most likely to generate profits from it, according to Alberto Tocchio, head of global equity and thematics at Kairos Partners.
For nearly two years, the winners of the AI boom were clear: chipmakers, memory producers and companies involved in AI hardware have enjoyed one of the most remarkable re-ratings in recent market history.
But Tocchio argues that investors are starting to ask questions about returns on the huge sums being poured into AI.
"The market is starting to distinguish between those who build the infrastructure and those who will really be able to extract economic value from it," he said.
That shift comes as investors assess whether massive spending by U.S. hyperscalers can translate into higher revenues, earnings and productivity. Recent market moves suggest leadership is broadening beyond the chip sector.
The high-beta momentum basket has fallen about 18% in just two sessions after surging nearly 60% in the first half, while the Russell 2000 has outperformed the S&P 500 in 10 of the last 12 trading days, he notes.
Tocchio sees opportunities in software, cybersecurity, cloud platforms and businesses with valuable proprietary datasets. As AI models become increasingly commoditised, ownership of corporate data could become more important sources of competitive advantage.
Beyond technology, Kairos is constructive on Europe heading into the second half. Tocchio points to attractive valuations, slowing inflation, reform efforts in Germany and signs of geopolitical stabilisation.
Gold is another favoured idea, with central-bank buying providing support after the metal's recent correction.