Making sense of this crazy world
Asia boosted by AI toolmakers
No comment from me this afternoon on the by-election result, and I’m also swerving the ongoing conflict between Iran and the US. The former won’t impact the wider markets because it was expected that Labour would take a pasting and the latter, although it has led to oil prices increasing, as yet, it’s not affecting the markets. There are mixed messages around the progress of talks between the two countries and we’ll just have to wait and see.
Today, our focus is on how there are significant winners and losers in the AI race, with investors leaning more towards hardware companies in Asia, as opposed to the US ‘Big Tech’ companies. The Magnificent Seven is now more like the Magnificent Two!
Nvidia’s results this week beat market expectations, but the share price didn’t match the rise in earnings. The fear over an AI bubble is steering investors away from the US, particularly towards Asia and emerging markets.
Bitcoin, another high-risk investment strategy, but even more so as it has no underlying earnings, is also out of favour with investors as every rally seems to get shorter and shorter, marked by an increased volume of sellers.
This week’s content: Asia boosted by AI toolmakers
- Big tech is being shunned in favour of Asian hardware makers
- The Magnificent Two!
- Nvidia posts blockbuster earnings, but…
- Selling the Bitcoin bounce
- Monthly performance data
- Is the Trump trade dead in the water?
- Conclusion
Big tech is being shunned in favour of Asian hardware makers
Recent market data shows a clear shift within the ‘Magnificent Seven’ tech giants. Despite their outsized influence in recent years, only two of the seven have actually outperformed the S&P 500 since January 2025. The rest have delivered more muted returns as investors reassess high valuations and the uneven impact of AI‑related spending (source: Aviva).
A commentary by Phil Serafino in Bloomberg refers to investors now seeing the makers of AI’s ‘picks and shovels’ as being the only clear winners of AI. Investors are shunning ‘Big Tech’ companies that are spending hundreds of billions of dollars on data centres, and software and service companies that might see their business disrupted by AI.
The stellar performance of the Asian hardware makers partly explains why the MSCI’s emerging market and Asia Pacific indexes are the market leaders this year.
Continues…
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Please Note: This communication should not be read as giving specific advice regarding your personal circumstances. This would only be given following detailed assessment of your individual needs. The value of investments may fall as well as rise; you may get back less than invested. Past performance is not necessarily a guide to future returns.