Global technology investing: AI and beyond

AI will remain a major technology investment cycle, but the best opportunities should be found in companies that can turn AI spending into durable revenue growth, profits and cash flow while maintaining strong financial discipline.

• The managers see interest rates, oil prices, geopolitical tensions, credit spreads and the availability of capital as critical to the duration of the AI build-out, which depends on both debt and hyperscaler operating cash flow.
• Microsoft, Alphabet and Amazon have strong balance sheets and cash flow, while newer AI infrastructure providers, including former bitcoin-mining neoclouds, depend more heavily on external financing and deserve greater caution.
• Semiconductor and AI infrastructure stocks led earlier in the year, while software lagged on disruption fears; cybersecurity and infrastructure software later emerged as beneficiaries as investors differentiated between business models.
• The managers expect the technology market to broaden beyond AI capex in 2027, with potential value in software, internet companies, non-AI semiconductors and IT hardware because some offer strong cash flow, attractive valuations and effective capital allocation.
• They assess disruption through revenue growth, the value proposition, conversations with end users and incumbents’ ability to respond, while focusing their stock research on free cash flow, EBITDA, EPS, valuation and sustainable competitive advantages.

Takeaway: Investors should remain diversified but selective, emphasizing companies with durable moats, pricing power, sustainable returns on AI investment and resilient financing structures rather than simply following the largest AI spending plans.