Megatrends Without the Megacall: Finding Opportunity from the Bottom Up

AI, deglobalization and electrification are reshaping markets, but stock selection rather than a single megatrend call should determine returns.

• Hyperscaler capital expenditure has increased from about US$350 billion last year to approximately US$750 billion this year, while Putnam estimates cumulative AI spending could reach US$5 trillion to US$7 trillion over the coming years.
• The scale of AI investment does not guarantee attractive returns because model revenues remain far below planned infrastructure spending and cheaper alternatives are improving rapidly.
• Deglobalization is changing supply chains, but reshoring is less clear-cut: factories take years and billions to build, Toyota is shifting only a relatively small amount of production from Mexico to the United States, and Daimler Truck can remain more profitable producing in Mexico despite tariffs.
• Electrification is increasing power demand through data centers, electric vehicles and grid upgrades, benefiting gas-turbine suppliers including GE Vernova, Siemens Energy and Mitsubishi Heavy Industries.
• Siemens Energy and GE Vernova offer similar exposure to power-demand growth but trade at roughly 23 times and 40 times earnings, respectively, illustrating how valuation and company fundamentals can outweigh the underlying theme.

Takeaway: Investors should use structural trends to guide fundamental research, but concentrate risk where conviction lies in individual companies rather than relying on broad AI, deglobalization or electrification exposures.