00:00One of the big debates has, of course, been, is AI in a bubble?
00:03We really don't think so.
00:05We think valuations look high, but they actually are driven by fundamentals.
00:09And many of the companies at the core of the AI theme have every opportunity to, if you like, grow out of those valuations.
00:16Now, the market's becoming, though, more discerning within the core of the AI theme.
00:20So we actually think it's worth spending active security selection budget on that part of the market.
00:26But also the AI theme's broadening out.
00:28We've just talked about power demand coming from it.
00:31We've seen great interest from many investors into clean energy, sustainable energy, energy of any sort, which is going to be needed to power the AI revolution.
00:40And that's where one of the bottlenecks is.
00:42Plus, as Matt was talking, you know, at some point, this will become adopted more broadly in the wider economy.
00:49That will help to support the surge in productivity that we're seeing.
00:52It's helping to deliver a broadening of earnings growth into the broader U.S. economy.
00:57And so we've been tactically overweight U.S. equities for quite some time as the market broadens out as it's doing at the moment.
01:03But at the same time, Alex, I mean, how can you tell when there's going to be a bubble?
01:09Because valuations just keep on rising.
01:11And every time we have, you know, constructive news from TSMC or NVIDIA, everything's fine.
01:16But at some point, it's got to match what you're spending.
01:20I would push back on valuations keep rising.
01:22Actually, valuations for the mega caps have fallen.
01:25Earnings growth has been so strong that actually we ended 2025 valuations slightly lower.
01:29So, again, it's not really a bubble.
01:31It's sort of fundamentals driven.
01:32Now, the question is, will the hyperscalers in the long run be the ones who actually earn the most from all of this?
01:38Or will the benefits be more diffused across the economy?
01:41And that actually leads to opportunities, we think, beyond what's worked well so far.
01:45So, we're thinking about the sectors in the U.S. economy that have the opportunity to adopt AI and deliver productivity improvements.
01:54But, you know, lots of investors are nervous about volatility at these valuations.
01:58And when we survey investors across Europe, they're pretty polarized.
02:01When we say, do you want to add to U.S. exposure or subtract from U.S. exposure, they say yes.
02:06But they're pretty evenly split between both of those options.
02:09And for the camp that's looking to reduce U.S. exposure, they are worried about the high level of valuations, not because it's a bubble, but because they rest on some optimistic assumptions.
02:18And so, they're looking, for example, at buffering their U.S. exposure, giving up some upside to cap the downside.
02:24They're looking at tactical opportunities type strategies that are going to be pretty nimble through the course of the year to deal with that volatility.
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