By Darius McDermott, managing director of FundCalibre
The dominant concern for markets at the end of 2025 is the potential for a bubble in artificial intelligence stocks. However, this concern is largely focused on the AI infrastructure companies, such as Nvidia, or hyperscalers Alphabet, Meta or Microsoft. AI is a vast long-term trend, and brings in a far larger ecosystem than these mega caps. As with many big themes, the key may be to look beyond the obvious.
Alex Cutler, manager on the Orbis Global Balanced fund, points out that AI cannot exist without a huge range of supporting elements, many of which have been overlooked by investors in search of more obvious beneficiaries. He says: “For a start, you need chips. Taiwan Semiconductor Manufacturing Company makes all of the world’s leading-edge AI chips, whether they are designed by Nvidia, Broadcom, or AMD, yet it trades at a discount to those companies. Although AI is more memory hungry than conventional computing, the memory makers Samsung Electronics, SK Square, and Micron Technology also trade at discounts.”
It is notable that many of these chip makers and memory companies are found in Asia and many Asia-focused funds have been leaning in to this trend. For example, the top holdings in the Guinness Asian Equity Income fund are Broadcom and Taiwan Semiconductor (3.8% and 3.7% respectively). It’s a theme the team is also playing in the Guinness Global Innovators fund through companies such as Lam Research and KLA Tencor*.
According to Dr Ian Mortimer, manager of the Guinness Asian Equity Income fund, semiconductors act as one of the fundamental building blocks for technological advancement: “Companies across end markets are continually demanding increasingly complex, high-performing and efficient chips, across an expanding number of applications and different system requirements – all to drive innovation within their own products.”
Moore’s Law
For many years, semiconductors followed Moore’s Law: that the number of transistors on a chip will double every two years, leading to an exponential increase in computational power and efficiency. However, increasingly, innovation is focused on improving the reliability and efficiency of chips, potentially through material science. “To facilitate this innovation, the semiconductor industry is one of the most intense in research and development.”
But even chips are of little use without related infrastructure, says Cutler. This brings in a variety of apparently dull companies, widely overlooked by investors. He highlights Balfour Beatty, “a construction firm with a roster of anonymous data-centre clients on its website. Those buildings sit on top of foundations laid by Keller, the world’s leader in geoengineering. Data centres can’t connect to electricity grids without transformers from Siemens Energy and its competitors”.
See also: Knacke’s money maps: The end of cheap compute… and so much more
Infrastructure companies not only tap into data centre growth – which is extraordinary on its own – but also into a broader electrification trend. In spite of some pull back on renewable energy assets in the US, the trend still has momentum. As Nick Langley, manager on FTF ClearBridge Global Infrastructure Income says, “we continue to see a tailwind for regulated utilities, which make up the bulk of our portfolios, as well as energy infrastructure and renewables, from the growing demand for power driven by data centres. Broader electrification and reshoring are also key to this growth”.
Cutler adds: “Grid power has to come from somewhere and has to be reliable. That bodes well for gas producer Shell and gas transporters Kinder Morgan and Enbridge. And amid all this, nuclear power is having a renaissance. As nuclear reactor providers to navies, BWXT and Rolls Royce are highly competitive for small reactor projects.”
Old-fashioned stocks
One of the ironies of this technology-driven boom is it is dependent on old-fashioned commodities and mining companies to make it happen. Evy Hambro, manager of BlackRock World Mining Trust, says: “We are excited by mined commodity demand coming from infrastructure build out related to multi-decade structural trends: rising power demand, artificial intelligence adoption and the low carbon transition. Increased geopolitical risk appears to have accelerated government action in these areas.”
Georges Lequime, manager of the WS Amati Strategic Metals fund, points out access to raw materials is now capturing the attentions of governments round the world as they recognise that they cannot deliver technological progress without it: “You have the president of the US talking openly about critical metals. We’ve got a situation where politicians are waking up and realising that while they thought they could get any metal at any price, China dominates the majority of supply. This is particularly true for rare earths, which are used in robotics and electronics.”
He says one of the rare earth companies in his fund is up 480% for the year to date because the balance of supply and demand has moved so far out of sync.
There are plenty of smart ways to play the dominant global trends that don’t rely on a handful of US mega caps that may or may not be overvalued. If a trend is big enough, its tentacles spread far and wide. The AI ecosystem is vast, and investors may start to scrutinise it more closely in the year ahead.
*Source: fund factsheet, 31 October 2025
