Tech shares have sold off over the past week with SpaceX stock seeing steep declines days after the company’s spectacular initial public offering (IPO).

The Nasdaq 100 – a US index mostly containing technology stocks – fell 2.1% in the week to 23 June and the S&P 500 fell 1.9% over the same period.

SpaceX (NASDAQ:SPCX) also saw steep declines, shedding 26.2% to bring its share price to below the level it closed its first day of trading following its IPO less than two weeks before.

SpaceX is not yet included in either index, but given the immediate success of its IPO its slide reflects a pessimistic shift in the market mood towards tech stocks.

“Investors remain super-cautious, nervous that high valuations could be chipped away at again,” said Susannah Streeter, chief investment strategist at wealth manager Wealth Club. “Even a fresh easing of the energy crunch, with oil prices dipping further, isn’t lifting sentiment much.”

What’s driving the latest sell-off, both for the tech sector and for SpaceX in particular?

Why did tech shares sell off?

Several factors are converging to create a cautious air around technology stocks.

One is the fragility of the peace agreement reached between the US and Iran last week.

“Despite threats over the weekend from Iran that it could re-close the Strait of Hormuz following continued fighting between Israel and the Hizbollah militia it supports in Lebanon, talks continue in Switzerland with the US to turn a memorandum of understanding and a ceasefire extension into something more like a permanent solution to the war that began nearly four months ago,” said Tom Stevenson, investment director at Fidelity International.

Markets are also spooked at the prospect of central banks hiking interest rates in response to rising inflation. While the Federal Reserve and the Bank of England both held rates when they met last week, international counterparts in the EU and Japan both raised their respective rates by a quarter of a percentage point.

Underpinning much of the negativity around tech specifically is a rising concern over whether the artificial intelligence boom can pay for itself.

“With doubts about the returns that can be achieved on investments worth hundreds of billions of dollars, together with a rising challenge to equity investors from rising bond yields, more equity issuance and fewer share buybacks, the boom feels fragile,” said Stevenson.

SpaceX shares fall on debt issuance

Debt issuance is a crucial top for tech investors at present, as SpaceX shareholders found out the hard way this week.

On 22 June, the company announced that it was seeking to raise $20 billion in debt, with the figure rising to $25 billion the following day.

Shares in SpaceX fell 16.4% on 22 June before recovering slightly on 23 June.

“Issuing debt at such a heady valuation raises questions about cash flow for this hugely capital-intensive venture,” said Wealth Club’s Streeter. “SpaceX has come down to earth with a bump, burning off most of its post-launch steam.”

Despite these declines, SpaceX shares closed 23 June 15.6% above their IPO price of $135 and 4.1% above the $150 at which they opened trading on 12 June.

Should you buy tech shares?

There is always a potential buying opportunity when sectors or markets sell off.

Whether you want to take advantage of the recent pull back in tech stocks depends largely on your circumstances and goals. It is worth bearing in mind, though, that the sector is still highly valued, and as recent days have shown it is prone to volatility.

If you are looking to buy tech shares, you could consider the following investment trusts and exchange-traded funds (ETFs) which offer exposure to the sector:

• Allianz Technology Trust (LON:ATT). Top holdings Nvidia, Alphabet, Micron Technology and Apple account for 30% of the portfolio as of 31 May, but the trust trades at a 7.3% discount to net asset value (NAV) as of 23 June, according to data from investment trust industry body the Association of Investment Companies.
• Polar Capital Technology (LON:PCT). Similarly, large tech companies account for most of the portfolio (over 96% of holdings have a market cap above $10 billion as of 29 May), but trades at a 9.2% discount to NAV.
• WisdomTree Space Economy ETF (LON:WSPG). From 29 June, SpaceX will enter the ETF’s portfolio with an initial 5.5% weighting. As of 23 June top holdings include space launch provider Rocket Lab and Japanese industrial firm Mitsubishi Heavy Industries.

A new world calls for new stocks. In the VT De Lisle America Fund, we use the paradoxical combination of value plus momentum to find winners for the next decade. For 40 years, declining interest rates and disinflation created a powerful tailwind for steady growth stocks such as McDonald's, Nike and Procter & Gamble. Their predictability was rewarded with rising price-to-earnings (p/e) multiples, thus they strongly outperformed the market. That all changed in 2021 with the return of higher interest rates and inflation, combined with the launch in 2022 of ChatGPT, which funnelled capital into AI infrastructure.

Higher rates and inflation tend to push down p/e multiples and put pressure on profits due to rising costs of materials and labour. At the same time, the urgency to spend on building out AI pushed capital into different, previously unloved, parts of the economy: construction, manufacturing and blue-collar jobs. Investors like to find a comparison with past cycles. We think the 1970s provides the best precedent, but with the addition of AI. So how will that play out today?

Companies that own scarce real-world assets and have growing order backlogs gain pricing power in this new capital-expenditure-driven cycle, positioning them to thrive in the new industrial economy. Within these big macro themes, minor ones are also emerging. One we like is the break-up of old industrial conglomerates via “spin-offs” – the packaging of overlooked industrial assets into attractive new listed companies.

Three stocks for your portfolio

In 2025, Honeywell spun off its speciality chemicals division, Solstice Advanced Materials (Nasdaq: SOLS). Solstice holds an oligopolistic position in refrigerants (its cash cow, increasingly necessary for data-centre cooling) while expanding capacity in its specialist chemicals business, supplying America's semiconductor supply chain. But the hidden crown jewel is its stake in the only US uranium conversion facility – one of only seven in the world – and a scarce asset during a nuclear renaissance. Although expensive-looking at a high 20s p/e, its earnings power is underappreciated as its chip exposure grows and higher-priced uranium contracts begin to roll in.

Forum Energy Technologies (NYSE: FET) makes high-tech parts for oil wells and subsea exploration. It is a picks-and-shovels play on rising global energy needs due to AI and on the increasing complexity of extraction. Forum operates in a high-value niche and is a leading player in all its product lines. The company prides itself on its patented technical know-how, which makes it hard to compete against. Low reinvestment requirements also provide high levels of cash generation. Even after a near tripling over a year, we think Forum's stock is a buy given its cheapness relative to cash flow.

Demographic trends offer another type of steady growth. Pennant Group (Nasdaq: PNTG) owns, leases and operates care facilities for the elderly and sees the ageing population in the US as a steady tailwind to increase sales for years. Its ability to renovate old buildings to add value in a market where supply is constrained by the cost of new-builds is impressive. Growing demand and scarcer assets, plus entrepreneurial local management teams, are giving it the chance to execute its vision. Pennant trades on a low 20s p/e and has a high double-digit growth rate, giving it an enviable p/e to growth ratio of not much above one.

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This year marks the tenth anniversary of an event that has proved to be of huge consequence for the UK stock market. No, not the Brexit referendum – 2016 was the year in which Japanese company SoftBank, led by founder and chief executive Masayoshi Son, acquired the UK's leading technology company, Arm, for £24 billion. Unlike American investors, professional UK fund managers became permanently disillusioned with the technology sector as a result of the collapse of the technology, media and telecoms bubble in 2000-2002, and so were delighted to be shot of its flagship domestic representative at a 40% premium to the prevailing share price.

With the yield on ten-year gilts at historic lows below 1.5%, pension funds were desperate to ditch equities and buy even more gilts, even leveraging up in their chase of the “liability-driven investment” delusion, which was to cost them hundreds of billions six years later. New solvency rules introduced after the 2008 financial crisis required insurance companies to invest in “safer, more liquid” securities, that is, short-dated gilts. Wealth managers could crow to their clients about short-term performance.

Only one major investor vehemently disagreed; James Anderson, the then manager of Scottish Mortgage Trust, bitterly criticised the sell-out on behalf of Baillie Gifford, with a holding of more than 10%. “We found it deeply depressing that Arm's management, and particularly its chairman, were so influenced by short-term shareholders.” Anderson said it was a premature sale of the UK's leading technology and intellectual property champions, “Britain's sole serious shot at building a global tech giant”.

In September 2023, Arm again went public when SoftBank floated the company on the New York Stock Exchange at a valuation of £40 billion, while retaining 90% of the shares. Unsurprisingly, pleas to list the shares in London were shunned, though Arm remains a Cambridge-based company. Since then, the shares have multiplied more than sixfold, although they are now down 17% from their early June peak.

Had Arm listed in the UK, it would be by far the biggest company on the London Stock Exchange. London is now only the world's eighth-largest stock market, accounting for just 3.1% of the MSCI All Countries World index. It has been steadily slipping down the rankings owing to its low exposure to the technology sector, which accounts for just 1% of the FTSE 100. This compares with 8%-9% in Europe, 27% in the US (not including Alphabet and Amazon) and 37% in Asia.

Britain's technology firms are condemned to stagnation

Also easily forgotten is the 2014 sale of Britain's DeepMind, a pioneer in AI, to Google for just £400 million. In 2006, US-based Illumina bought Solexa, the UK-based inventor of gene sequencing, for £315 million. It became the key building block in Illumina's climb to a market value of more than £50 billion (although the shares have fallen by two-thirds in the last five years). These and other examples show that Britain has a good record of creating and building technology champions, but that unambitious management, combined with uninterested and short-sighted institutional investors, means that they sell out rather than scale up in the way that American giants have shown is possible.

Without the “ecosystem” that results from successful technology firms, Britain's pool of talent will go elsewhere, there will be no pool of capital looking for the next potential breakthrough, a diminishing appetite for risk and no list of success stories to inspire future entrepreneurs. The London Stock Exchange has become a value trap – a shrinking pool of reasonably managed solid businesses with mediocre prospects. Such a market can have an occasional catch-up year of outperformance, but without a cadre of proper growth firms, is condemned to an ever-shrinking share of global capitalisation. Arm's sale to SoftBank, now Japan's largest company, didn't start this process, but it marked the point at which it became irreversible.

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Alphabet, Google's parent company, is listed in the US with a total value greater than that of the entire UK stock market. Billions of people use its search engine every day – indeed, the Google name has become so ubiquitous that it is now used as a verb around the globe. Yet there is more to Alphabet than Google.

Beyond search and advertising revenues lies an empire that includes everything from deep-sea cables to self-driving cars and energy storage. The business uses the billions harvested from search advertisements to fund massive bets on the future and is fast becoming one of the most influential companies in history.

The Alphabet name reflects a corporate mission to fund independent bets that produce “alpha” – the term in finance for an investment that outperforms the broader market. Alphabet wants to be the structure underpinning countless future innovations. The name signalled to the market that the firm was no longer just a search engine, but an incubator of new technology.

Alphabet's rise from Google search to global dominance

Search remains Alphabet's largest source of profits. Its enormous scale explains why the company can afford to fund so many broader ambitions. When the business launched from a garage in 1998, it was just one of many experimental search engines competing on the early World Wide Web. Its rapid rise to dominance was driven by a proprietary algorithm called PageRank. Unlike rival systems that mainly counted how often a keyword appeared on a page, Google ranked pages based on the quality and importance of links pointing towards them. A link from a respected university or major news site carried far more weight than one from an obscure blog. This breakthrough produced far more useful search results, triggering a wave of adoption that quickly led to dominance. Put simply, Google search worked much better than everything else.

Today, Google remains the search engine used by most. It controls more than 90% of the worldwide search market and processes billions of queries every day. Its closest rival, Microsoft's Bing, holds only a tiny share by comparison. Google's reach also extends far beyond its own homepage. The company provides the underlying search infrastructure for countless browsers and software applications around the world. Competitors struggle to replicate what Google has built because search engines improve through users' behaviour. The more people who use the platform, the more data it collects and the better the system becomes. By capturing most of the world's search data, Google continuously improves, creating a self-reinforcing cycle that keeps competitors behind.

This constant stream of searches is transformed into revenue through a system of paid results. When a user searches for a term with commercial value, the engine places sponsored links at the very top of the page, positioned directly above the information. Google avoids charging businesses a flat fee simply to display these links. Instead, it operates on a pay-per-click model, collecting a fee when a user selects a sponsored result. Because millions of consumers use the search box to find products, services and local businesses every second, these small fees accumulate into billions of dollars of highly predictable revenue.

This is so profitable because the underlying mechanics require little human involvement. Traditional advertising agencies only grow by hiring armies of account managers and media buyers to manage campaigns. Google removed much of this by building an automated, self-service advertising platform to run its pay-per-click business. Advertisers simply log into a dashboard, set their budgets and bid against one another for visibility tied to specific queries from users. Valuable searches, such as those related to legal or financial services, command extremely high advertising prices. This allows Google to generate enormous profits from everyday internet traffic without relying on large numbers of highly paid employees.

At the end of last year, Alphabet employed roughly 191,000 people worldwide. However, those workers are spread unevenly across the business. Most do not work directly on the core search or advertising operations. Instead, they are concentrated in labour-intensive divisions such as Google Cloud and areas such as compliance and other administration. The core systems and software that power Google's search engine require only a small group of engineers to maintain and monitor it. By the end of 2025, Alphabet was generating annual revenue equivalent to more than $2.1 million per employee, although the figure within search alone is probably far higher, perhaps as much as $10 million per employee. This ultra-low headcount relative to sales creates a self-operating engine that supports the rest of the organisation, funds Alphabet's broader ambitions and produces vast profits – thought to be $1 billion every two to three days.

Branching out into Google Cloud and beyond

The fastest-growing large-scale part of the business outside of search is Google Cloud. This division sells computing power and data storage to large corporations and public-sector organisations, providing a platform for businesses to build, host and run their own software applications. Unlike the search engine, the cloud business is inherently labour-intensive, requiring a global sales force. By the end of 2025, the unit had exceeded $70 billion in revenue, driven by demand for machine-learning applications. This segment spent years burning cash to build physical data centres, but has now matured into a highly profitable operation, generating billions in quarterly operating income. The third large division within Alphabet is subscriptions and devices. This includes premium, advertising-free access to YouTube, digital storage upgrades through Google One, which pools together personal consumer storage for Google Drive, Gmail and Google Photos. This is distinct from the corporate cloud, focusing instead on individual consumers' hardware, such as Pixel smartphones. Total consumers' subscriptions have climbed past 325 million globally. This division generates more than $50 billion annually.

What ultimately cements Alphabet's dominance is how seamlessly it intertwines these separate businesses. Google Video's early failure was solved by acquiring YouTube, for example, which was then deeply integrated into core search results. Google Maps was built to serve local search needs, but is now embedded directly into the Android operating system and Android Auto vehicles' dashboards. This interconnected web provides built-in, zero-cost marketing across the entire portfolio, making the user's experience smoother while locking consumers firmly inside Alphabet's systems.

The relentless flow of cash allows the parent company to invest on a scale few companies in history can match. Rather than returning profits to shareholders through dividends or share buybacks, Alphabet operates like a vast venture-capital fund. Its investment strategy is divided into three tiers. For near-term product improvements, it uses Google Labs, a fast-moving environment where software teams test early features, such as improved AI systems, directly with the public. For medium-term time horizons, the company focuses on strategic acquisitions, buying external platforms and scaling them over time. Finally, the long-term horizon is handled by X Development (formerly Google X), the “Moonshot Factory” created to back speculative technologies ranging from self-driving cars to grid-scale energy storage. In these ways, Alphabet channels its search, cloud and subscription revenues into tomorrow's cutting-edge technology.

Alphabet's formula for acquisitions

Alphabet has acquired more than 250 technology companies over the years. Each deal has followed a similar formula: acquire a promising but financially constrained technology and scale it using the company's engineering expertise and vast profits. Google Maps originated from Keyhole, a struggling start-up founded in 2001. Keyhole developed a 3D digital globe called EarthViewer 3D and even received early backing from America's Central Intelligence Agency. The technology was impressive, but the business model weak. Keyhole sold its software on physical CDs to real-estate firms and defence agencies. Google recognised that around a quarter of all web searches were location-related and acquired Keyhole in 2004 for roughly $35 million. It removed the expensive pricing, introduced a cleaner, more accessible interface, and relaunched the platform as Google Maps. In the process, it transformed a niche military-style tool into a free utility that has become almost as recognisable as the search engine itself.

The acquisition of YouTube in 2006 stemmed from Google's own failure in online video. Its in-house platform, Google Video, was losing ground to its rapidly growing rival. YouTube succeeded by offering a simple interface that allowed anyone to upload and stream videos easily. However, by the summer of 2006, the company was struggling under the weight of its own popularity. Hosting costs were soaring, while copyright lawsuits from traditional media companies threatened its survival. Realising Google Video had lost the battle, management stepped in with a $1.65 billion acquisition. The takeover rescued YouTube from likely insolvency and allowed Google to secure the leading destination for online video before legacy media companies could shut it down. By the end of 2025, YouTube was generating more than $40 billion in annual revenue.

The 2005 purchase of Android is probably the most successful acquisition. As a start-up, it had been developing an operating system for mobile handsets, but ran short of cash to fund engineering salaries. At the time of its purchase, it was a small company employing eight people and was bought for just $50 million. This was such a small sum at the time that it wasn't even disclosed to the stock market. The goal of the acquisition was to prevent competitors from blocking its search engine on mobile devices. By making Android free, Google rapidly came to dominate mobile software, eventually capturing more than 70% of the global smartphone market. This comparatively small investment helped ensure that the search business continued to grow even as smartphone usage overtook computer usage.

The 2014 acquisition of DeepMind secured Alphabet's lead in AI. The laboratory, which was founded in London by Demis Hassabis, Shane Legg, and Mustafa Suleyman, had assembled one of the world's strongest machine-learning research teams. DeepMind focused on neuroscience-inspired AI and deep reinforcement learning. Yet cutting-edge AI research is very expensive, requiring vast computing resources and highly paid engineers while producing little immediate revenue. Much of Hassabis's time was spent raising venture capital. Recognising that DeepMind needed the support of a company with deep pockets, the founders agreed to a £400 million sale to Google, with Hassabis taking on the role of CEO of the renamed Google DeepMind. The deal kept the research group based in London and provided the resources needed to pursue foundational scientific breakthroughs. That long-term backing ultimately paid off. Among other things, Hassabis's work on protein folding using DeepMind recently won the Nobel Prize in chemistry.

How Alphabet is shooting for the moon

Where Alphabet stands apart is its willingness to invest in technologies that may take decades to mature. The X Development division filters all ideas through a demanding three-part screening process to protect capital. Projects must address a global problem affecting millions, propose a radical breakthrough solution and rely completely on technology that does not yet exist. Incremental improvements are rejected outright. To encourage bold experimentation, X is also designed to reward failure. Teams are expected rigorously to test their ideas and can even receive bonuses for proving a project is technically or economically unworkable before significant resources are wasted.

This strategy has produced a trail of discarded technologies, including mysterious, giant floating barges intended to be high-end, floating marketing showrooms; a technology for storing renewable energy by pumping electricity into massive tanks of molten salt and chilled liquid; high-altitude, helium-filled balloons designed to float in the stratosphere, creating a shifting network to beam wireless internet down to remote rural communities. But the crown jewel of the moonshots to date is Waymo, the autonomous-vehicle division that began life in 2009. Waymo shows how a massive cash cushion allows a company to outlast an industry cycle. While some car makers promised self-driving fleets by 2018 only to scale back their ambitions when machine learning proved too difficult, Alphabet simply maintained its multi-billion-dollar funding trajectory. By refusing to rush out unproven systems to market, the division solved the major challenges.

Waymo has now achieved scale, with roughly 3,700 vehicles operating, servicing half a million paid rides per week. Its fleets of autonomous vehicles operate robotaxi networks across major American cities, including Phoenix, San Francisco and Los Angeles, completing passengers' trips without human drivers. In September of this year, it is due to launch in London. What began as a highly speculative experiment has matured into a genuine advancement in transportation.

Deep underwater, Alphabet is also building global subsea cable infrastructure. This is an ongoing project that has so far created a total of 60,000 miles of armoured cabling crisscrossing the oceans. To support the growth of its cloud services and advertising, Alphabet shifted from renting space on third-party telecommunications networks to owning its own. These subsea lines are the plumbing of the internet, moving vast amounts of data across the world at the speed of light. In owning this infrastructure itself, Alphabet ensures its consumer services operate with lower latency than that of competitors.

Is Alphabet worth owning?

Turning digital advertising revenue into real-world infrastructure requires enormous investment. For investors, the key question is whether these assets will create lasting value or simply become an expensive distraction. The shares of Alphabet rarely look cheap on any conventional valuation metric, but waiting for a deep-value entry point has been a fool's errand. Ever since the company listed on the stock market in 2004, there has never really been a bad time to buy its shares.

Not that the shares have risen consistently. Alphabet's shares have fallen quite significantly a few times over the years, dropping roughly 50% during the 2008 financial crisis and weathering several 20%-30% declines since. Every single decline has proved to be an exceptional buying opportunity, as the underlying earnings have moved relentlessly higher. This compounding has generated astonishing wealth, transforming its founders into centi-billionaires and ranking them among the wealthiest individuals on Earth. The model does not just reward senior executives. In 1999, when Google employed just 40 people, massage therapist Bonnie Brown joined the company part-time. Her pay was only $450 a week, but she also received stock options. Five years later, she retired a multi-millionaire and went on to create her own charitable foundation. Had she kept her shares, she would now be a billionaire.

Despite a massive market valuation of about $4.5 trillion, Alphabet is still growing remarkably quickly. A simple heuristic for evaluating growing companies is to ask whether the business can generate enough operating profit within five years to make its current enterprise value look cheap. Specifically, can its future operating profits reach a tenth of that valuation? For Alphabet, that means aiming for roughly $450 billion in annual operating profit. Last year it made about $190 billion and is forecast to grow at 20%-25% per annum for the next five years. At that level of growth, the company's current trajectory makes $450 billion perfectly feasible.

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Did you miss out on the SpaceX initial public offering (IPO)? Perhaps you missed the cutoff altogether or failed to get your desired allocation of shares, given its fourfold oversubscription? In either case, you can still look forward to subsequent opportunities to get involved in the investment story du jour.

While most IPOs trigger a period of volatility the expectation with this one is that it will be sharper and more protracted. Given the huge level of attention, limited allocation available to UK retail investors and the staggered timeline for expected trading (selling as lockups expire and buying as the underlying indices of various tracker funds bring the stock onto their benchmarks), investors can expect swings in SpaceX’s share price to continue through the second half of the year, at least.

Lynn Hutchinson, head of ETF and index solutions at Charles Stanley, said: “It’s [not only] one of the most talked about stocks of the last few months but retail investors quite like a new stock becoming available. Plus it’s got the ‘Elon Musk factor’ – who has a huge retail fanbase as well, albeit not across the board. Many investors have wanted access to this company for years.”

Multiple buying opportunities as shares are released

Funds tracking the Nasdaq-100 will be among the first index funds to include SpaceX, in line with newly amended rules.

These include fast-tracked entry, allowing inclusion to Nasdaq’s flagship index fund 15 days after an IPO instead of the previous window of three months, and removal of its minimum float requirements. A three times multiplier will be introduced; rather than the currently tradable market cap – or free-float – of $75 billion, the stock will be weighted based on a market cap of $225 billion, which could force passive investors to chase the stock, further fuelling volatility across the index as a whole.

Index providers MSCI and FTSE Russell will include SpaceX after 10 and five trading days, respectively.

S&P 500 index funds will include SpaceX later after S&P Dow Jones Indices confirmed it won’t fast-track the company’s inclusion in the index.

“There will be an initial dash for the shares because of the limited availability but after that, the next release will likely be after Q2 earnings, so more shares will likely come on between July and September, if indeed the holders (employees and early investors) decide to sell them,” said Hutchinson.

Early investors, staff and other insiders are subject to staged lockups to manage supply and demand, she added.

“It looks like it will be staged, with some released earlier, and the full lockup expiration after 180 days. We expect it will be staggered and therefore volatile for several months yet.”

She said clients had been in touch asking whether they should sell the Nasdaq in favour of something else. But she warned investors not to get carried away, reminding that the allocations within many of these funds would be tiny, given the 5% expected free-float stock being made available.

“Perhaps as it gets further along and if the stock’s still really volatile, it might make more of a difference. But at the moment we’re looking at, in some cases, 0.2% to 1% depending on which index it’s going into because there’s not enough free-float available.”

Hutchinson urged investors to think about the underlying inclusion criteria, whether they’re looking at a broader index fund or a specialist thematic exchange-traded fund (ETF).

“The VanEck Space Innovators ETF (LON: JEDG) is the largest space ETF by assets under management, which you’d expect [SpaceX] to go in, but it’s unlikely to go into that until September because it’s got a 10% requirement of free-float, and there won’t be 10%. It will go in at some stage, and I guess they’ll look at it around September again.”

Speaking to MoneyWeek, Moritz Henkel, product manager at VanEck EU, concurred; the company said it will wait until the September review before deciding if SpaceX will be added to the ETF, subject to it meeting the criteria at that time.

“There will be no pre-IPO or super fast-track inclusion, nor rule change,” he said.

From a governance perspective, his team believes any new company should be assessed against the full set of index rules, not on an ad hoc basis, especially because increased volatility makes it more difficult to find a fair price in the beginning.

“For us, it’s more important to stick to defined rules and have a consistent rules-based exposure than to chase this early onboarding of SpaceX.”

Elon Musk and his team have blazed the trail, bringing a government industry into the private sphere as a commercially viable ecosystem. Henkel said the reusable Falcon boosters were a turning point, dramatically lowering launch costs and enabling new space companies, seen in the proliferation of IPOs and special purpose acquisition companies (also known as SPACs) coming to market.

Yet much still depends on launch execution, R&D and mission reliability. As SpaceX transitions to public markets it will essentially rerate the whole sector, bringing greater transparency, investor scrutiny and pressure to meet deadlines, amplifying its successes and failures.

“We’ve seen much hype and the current growth estimates are obviously very ambitious. But we’re talking about decades, not months for their business strategies.”

He said the focus on risk is a real point of difference, which was highlighted in the IPO prospectus.

“A couple of failed missions may only have a small impact to the balance sheet – even though they are very costly – but they’re potentially having a much larger effect on the actual stock price. Failed missions lead to decreased investor confidence in the technical abilities, which can cause you to lose trust.

“When we’re looking at SpaceX in the coming months and years, and capabilities of meeting deadlines, and commitments they’ve communicated to the open market, these are now more pressured because they are in the public market.”

Where will the money come from for this massive IPO?

Several reports cite JPMorgan’s estimates that roughly $95 billion worth of holdings – likely in the big tech names – will be sold off to accommodate new positions in SpaceX.

In her blog last week, Boring Money’s Holly Mackay makes a similar point: “If large investors want to buy in, they will need to free up cash by selling other holdings. They might take some profits from high-performing shares like Nvidia, so I’d expect some knock-on volatility in other shares which have had strong gains so far this year.”

What other IPOs have shown parallels to SpaceX?

While the hype may be comparable to Google’s IPO back in 2014, the reality for those trying to participate in a hugely popular public listing may more closely mirror that seen when Royal Mail floated in October 2013, with a seven times oversubscription.

Jeremy Fawcett, head of Platforum – a retail investment consultancy – said Royal Mail was the last big one in the UK, comparable to the government sell-offs during the move to privatisation in the 1980s.

If the amount you actually buy is significantly lower than what you’d hoped for, by the time you come to sell, taking into account trading fees and foreign exchange, you have to really think about how much you end up with.

“There’s a huge amount of uncertainty… if you remember the 2012 Olympics, we all applied for hundreds of tickets. And most people got nothing. So you get excited because you think, ‘I put my money on the line’, and then you get very little out of it.”

The emerging market (EM) universe is very diverse in terms of what drives individual economies. What does China have in common with India (other than being populous and in Asia) or either of them with Brazil? Yet they are treated as a block, and recent trends are stretching these contradictions further than ever.

A top-down investing strategy often involves assigning things to groups, then buying the most compelling groups or choosing the most attractive within a group. These groups can seem arbitrary – the difference between members can be as big as the similarities. Yet in the investment business, classifications that seem easy to understand can stick around well past the point where they make sense.

Standard rules of thumb for emerging markets would tell you that the last few months have been difficult. Many emerging markets are energy importers, so will suffer from higher oil prices. Markets also tend to be affected by inflows and outflows from foreign investors. If global investors get more nervous, they would be expected to cut emerging-market exposure first and take their money home. Yet the MSCI Emerging Markets index is up by 20% in sterling so far this year. How?

AI stocks are over-represented in emerging markets indices

The explanation hinges on two points. The first is that two of the biggest markets in the index are emerging markets only in one very specific sense. South Korea and Taiwan retain certain restrictions, mostly around their currencies, that MSCI deems incompatible with being in the developed markets group. Yet in many respects, they are both wealthier and more advanced than many developed economies.

The second is that a few huge companies – Taiwan Semiconductor (TSMC), Samsung Electronics, SK Hynix – are huge beneficiaries of the AI boom and are driving their markets even more than the Magnificent Seven drives the US market. Those three stocks account for almost 30% of the MSCI Emerging Markets index. Taiwan and Korea together make up 50% of the index. In turn, TSMC is 55% of the MSCI Taiwan, while Samsung Electronics and SK Hynix account for 60% of the MSCI Korea.

These are eyebrow-raising numbers. They have worked out very well for any broad emerging-market investor. Still, we must remember that if the AI boom ends and the US market slumps, the emerging market index will do the same – it's been a play on the same theme.

If you want diversification, you will only find it in funds whose mandate does not bring in these stocks – BlackRock Frontiers (LSE: BRFI) or Barings Emerging EMEA Opportunities (LSE: BEMO), for example. Of course, these funds have lagged in recent months, held back by the lack of tech exposure or battered by the Middle East crisis. I would not say it is yet time to rotate out of broader emerging market funds. But it is something to keep in mind if the crisis passes and the AI boom falters.

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As Elon Musk’s SpaceX gets ready to list on the Nasdaq, investors are poised for what is expected to be the biggest initial public offering (IPO) ever.

SpaceX has targeted an IPO price of $135 per share to raise around $75 billion, with a target valuation of roughly $1.75 trillion. Shares will start trading on 12 June.

High-profile events like an IPO can serve as a ‘rising tide’ for a sector and others that are closely related; adjacent companies that might have otherwise been overlooked can benefit from a halo effect. This might include satellite technology, launch services and defence infrastructure stocks.

“A SpaceX listing could do exactly that for space,” said Darius McDermott, managing director at Chelsea Financial Services.

It’s important to remember that an IPO isn’t always a ‘one and done’ event. While there’s often (but not always) a ‘pop’ the day after a company floats, the period immediately after a listing can be volatile – and SpaceX is expected to bring more share price movement than usual, and for longer. So while these ideas present opportunities that may benefit by proxy to the main headline act, investors across the broader sector could be in for an equally bumpy ride.

Investors flocked towards space stocks and funds in the run-up to SpaceX’s initial public offering (IPO), according to data released by investing platform AJ Bell.

Analysis of the platform’s most popular stocks and funds in the three months leading up to the IPO show that investors have been eager to invest in the space economy, with funds and investment trusts like Scottish Mortgage (LON:SMT) and exchange-traded funds (ETFs) like VanEck Space Innovators ETF (LON:JEDG) rocketing in popularity.

“Investors keen to join the race to space haven’t sat on their hands waiting for the SpaceX IPO,” said Dan Coatsworth, head of markets at AJ Bell. “Space-related investments feature heavily in the most popular purchases on the AJ Bell DIY investor platform over the past three months, as excitement builds ahead of SpaceX’s stock market debut on Friday 12 June.”

How SpaceX’s IPO could lift the space sector

AJ Bell’s analysis ranked the most popular stocks and funds that tie into the space theme ahead of SpaceX’s IPO, based on net buys on its DIY investor platform.

^{Source: AJ Bell. Based on highest number of net buys 8 March to 8 June 2026 on AJ Bell DIY platform.}

It is noteworthy that many of these investments have had greater demand than otherwise staple investments.

“More people bought shares in Scottish Mortgage, Seraphim or the VanEck Space ETF during the past three months than blue chip stocks Shell, BP, AstraZeneca and National Grid, all of which regularly feature in the most popular names with UK investors,” said Coatsworth.

“That’s remarkable as these names are stalwarts of ISAs and pensions across the country, with investors often buying shares in them every month for their attractive dividends and long history of generating solid earnings.”

Not all the investments gained in value in the months running up to SpaceX’s IPO: aerospace contractor BAE Systems (LON:BA.) fell 12% over the past three months.

Some, however, have soared. SpaceX supplier Filtronic (LON:FTC) and spacecraft builder Redwire (NYSE:RDW) both more than doubled in value in the three months leading up to SpaceX’s IPO.

How can you access other upcoming IPOs?

Anthropic and OpenAI, both private AI developers, have announced plans to IPO since the start of June, and should these be a success then it could usher in a new wave of tech IPOs.

“SpaceX may be the IPO of the moment but there are plenty of other exciting private companies in the pipeline for a potential public offering,” said Chelsea Financial’s McDermott.

“Without specialist knowledge, it can be hard to know which ones to back, but investment trusts offer retail investors a ready-made route to some of the best pre-IPO opportunities”.

For a ‘pure-play’ private company focus, Chelsea favours Baillie Gifford’s Schiehallion (LON:MNTN).

“It holds eight of the 10 largest private companies in the world, with the majority of its portfolio in unlisted names, including Bending Spoons, ByteDance, Databricks, Revolut, Stripe and Anthropic.

“These managers have deep private equity networks and the expertise to value private businesses that most ordinary investors simply cannot replicate, and by getting in before a listing, investors can capture far more of the growth,” he said.

Chelsea’s Managed Funds range also holds Chrysalis (LON: CHRY) and Seraphim Space (LON: SSIC), which offers exposure to the space sector specifically with both ordinary and C-shares available.

Should you buy private or public shares?

Once a company lists, its shares become available on the secondary (or open market) and are far easier to buy.

Many of these companies are remaining private for longer (before moving into public ownership when they IPO), generating huge amounts of revenue while doing so, meaning once they list they’ve already enjoyed rapid growth.

For investors keen on space investing broadly but put off by the perceived risk or administrative burden that can be associated with an IPO, it might be worth looking for similar companies already listed; sometimes the more attractive entry points may not be the headline names but companies further along the supply chain.

McDermott said Schroder US Mid Cap Fund is one such option for indirect, diversified exposure.

“[Its] holdings include Hexcel (NYSE:HXL), which makes composite materials used in spacecraft for clients such as SpaceX, Blue Origin and Lockheed Martin; MACOM Technology Solutions (NASDAQ:MTSI), whose semiconductors are critical to satellite communications; and BWX Technologies (NYSE:BWXT), which provides nuclear propulsion and power components for NASA space programmes,” he said.

Investing in a specialist fund

You might prefer to invest in the theme with a more targeted approach. ETFs are common routes to investing in a specific theme, such as the space economy. Some broad portfolios available to UK investors include the ARK Private Innovation ELTIF (only available via a financial adviser), VanEck Space Innovators UCITS ETF, or a new vehicle from WisdomTree, whose Space Economy UCITS ETF (LON:WSPG) launched on the London Stock Exchange on 5 June.

Pierre Debru, head of research, Europe at WisdomTree, said while the SpaceX IPO could be a “defining milestone” in driving the sector’s broader appeal, the fundamentals behind the investment case look robust and durable.

As the sector matures, he believes launch systems will become more efficient, easier to access and cheaper, expanding the opportunity set across the value chain.

Earth observation and geospatial intelligence are increasingly feeding into the real economy, supporting industries from agriculture to critical infrastructure.

“Emerging applications, including in-orbit manufacturing, servicing and space-based data infrastructure, are also opening new markets and reinforcing the long-term growth potential of the theme,” added Debru.

If actively managed funds are your preference, one dedicated option is Neuberger Berman’s Next Generation Space Economy Fund. When the fund launched four years ago, the group said the space economy was so much “more than rockets and satellites”, influencing sectors as diverse as banking and precision agriculture to air traffic control and ride sharing.

SpaceX is about to hit the public markets for the first time, and when it does so it is likely to instantly transform from the world’s most valuable private company to one of the ten most valuable of any type.

The question that will always raise its head at any initial public offering (IPO) is the price at which it sells.

IPOs are often an opportunity for founders and long-term investors to cash in on the efforts they have put into its growth, and the risks they have taken along the way. Because of this, value-focused investors, including Warren Buffett, the chairman and former CEO of Berkshire Hathaway, have tended to eschew them – the logic being that these company insiders will time their exit to coincide with the moment when they will receive the highest value for their shares.

It’s overly cynical to apply this logic wholesale. The same reasoning could be applied to any purchase or sale of any asset; if you buy a stock or fund on the open market, the person you are buying it from probably knew about it before you did, and probably thinks that now is as good a time as ever to sell.

In SpaceX’s case, existing shareholders (including founder and CEO Elon Musk) will also have to hold their shares for 366 days after the listing before selling. The funds raised will go back into SpaceX, enabling it to accelerate its growth plans.

But given that SpaceX looks set to IPO with a valuation of over $1.75 trillion – likely making it the seventh or eighth most valuable company in the world – much scrutiny has been applied to whether or not the $135 per share price tag it is targeting makes sense for investors.

You shouldn’t invest in any asset without carefully considering the risks involved and deciding whether or not it matches your current position. Below, though, we explore the bull and bear cases behind the valuation of one of the most talked-about companies of the year.

SpaceX’s valuation: the bull case

In its IPO prospectus, SpaceX claimed to have identified “the largest actionable total addressable market (TAM) in human history”.

The TAM – effectively the entire economic opportunity the company believes it could eventually address – totals $28.5 trillion, which is a little below the GDP of the US in 2024 (28.8 trillion). This breaks down into three categories:

• Space, including space-enabled solutions (in other words, SpaceX’s rocket launch services): $0.37 trillion.
• Connectivity, including Starlink Broadband and Starlink Mobile: $1.6 trillion.
• Artificial intelligence (AI), which includes AI infrastructure, consumer subscriptions, digital advertising and enterprise applications: $22.7 trillion.

Last year, SpaceX generated revenue of $18.7 billion. The TAM that it has laid out implies that it has the potential to increase this number more than a thousand times over – though there is no specific timescale over which this could happen. The prospectus outlines various risks that could restrict its ability to reach this market, including the fact that many of the required initiatives “involve significant technical complexity, unproven technologies or technologies that do not exist, and such initiatives may not achieve commercial viability”.

Regardless, bulls argue, there is a huge growth opportunity at play here – perhaps even a better opportunity than that posed by any other company on the planet, given that SpaceX operates at the intersection between space and AI, two of the most groundbreaking, forward-looking themes of our age.

Dan Coatsworth, head of markets at AJ Bell, said: “There is no other company doing what SpaceX does on the same scale, which could be a key appeal to existing and potential investors.

“Space excites people because it is the great unknown and SpaceX has a blueprint to turn dreams into dollars.

“SpaceX boss Elon Musk is a visionary and despite polarised views towards him, the CEO does seem to get things done. The Starlink satellite services arm makes SpaceX interesting because it provides recurring revenue, meaning there is a constant flow of money coming into the business to keep the lights on while it works on big picture ideas like colonising Mars.”

According to people familiar with the matter cited by the Wall Street Journal, Morgan Stanley and Goldman Sachs analysts both project that SpaceX’s revenue will near $160 billion in 2028 – almost ten times its level in 2025.

“Bulls might argue SpaceX’s earnings growth potential is so great that valuing it using 2027 or 2028 forecast earnings could make the equity rating look less rich,” said Coatsworth.

SpaceX’s valuation: the bear case

Hard-nosed investors might view the arguments above with a degree of scepticism.

While SpaceX has outlined an opportunity thousands of times larger than its current revenue, there are a lot of uncertainties involved in reaching it. In the meantime, its shares are going on sale at close to 100 times the revenue it made last year. That limits the potential for upside growth, and increases the potential for the shares to fall in value, should SpaceX’s future growth not go according to plan.

Analysis from investment research firm Morningstar estimated the fair value for SpaceX shares at $63 – less than half the price tag that SpaceX is targeting at its IPO.

“Investors are naturally excited about the SpaceX IPO, but with investment bankers suggesting a $1.75 trillion valuation, we believe it's overvalued,” said Michael Field, chief equity strategist at Morningstar. “We believe the business has real strengths, particularly in Starlink, but with so many unknown and untested technologies underpinning much of the valuation price, particularly within the AI business, we think the valuation is extremely speculative.”

Morningstar was also bearish on the opportunity for Starlink. While SpaceX estimated the service’s TAM at $1.6 trillion, Morningstar estimated that $129 billion is a more reasonable figure given technical constraints and the fact that Starlink will find it harder to compete in dense urban telecom markets.

In one scenario, though, Morningstar suggested that SpaceX might be undervalued at its IPO. Its most optimistic ‘moonshot’ scenario valued SpaceX at $1.97 trillion, or $154 per share – but the company only assigns a 7% probability of this scenario playing out.

AJ Bell’s Coatsworth noted other risks that could apply to SpaceX over time, including share price dilution if its ambitious plans require further rounds of fundraising, as well as unanticipated setbacks such as launch failures or regulatory changes.

Anthropic submitted a draft registration statement to the US regulator on 1 June for its imminent initial public offering (IPO), the second US technology company to do so in recent weeks.

Slipstreaming SpaceX (whose own IPO is expected later this month), the San Francisco-based artificial intelligence (AI) company behind the Claude series of large language models (LLMs) said the amount it was targeting – determined by the number of shares to be issued and their price – had not yet been set.

An unattributed statement on its website said: “Today, Anthropic, PBC confidentially submitted a draft registration statement on Form S-1 to the U.S. Securities and Exchange Commission for a proposed initial public offering of our common stock. This gives us the option to go public after the SEC completes its review. The proposed initial public offering will depend on market conditions and other factors.”

The company has appointed Morgan Stanley and Goldman Sachs to lead its listing process, according to Bloomberg, which said J.P. Morgan was also involved.

The flotation is expected to take place as soon as October, although many details are still speculative.

Which fund managers have invested in Anthropic?

Just days before it confirmed submitting its paperwork to the SEC, Anthropic announced it raised $65 billion in a series H round, led by Altimeter Capital, Dragoneer, Greenoaks and Sequoia Capital, bringing the company’s estimated valuation to $965 billion.

Brad Gerstner, founder and chief executive of Altimeter Capital said: “Claude’s latest advancements have driven large-scale adoption among the world’s most demanding organisations. This momentum positions Anthropic to lead the next phase of AI innovation and capture the enormous opportunity ahead.”

Co-leading the round were Capital Group, Coatue, D1 Capital Partners, GIC, ICONIQ and XN. Other “significant investors” named included Baillie Gifford, Blackstone and T. Rowe Price.

The raise also includes $15 billion of previously committed investments from hyperscalers, including $5 billion from Amazon.

What is the easiest way for UK retail investors to hold Anthropic?

Several investment trusts hold Anthropic, allowing investors exposure to the stock without them having to get involved in the often onerous and volatile IPO process.

Annabel Brodie-Smith, communications director of the Association of Investment Companies (AIC), said as it’s easier for investment trusts to hold privately held companies, these are a sensible option for DIY investors.

Five investment trusts have exposure to Anthropic, which she said “provide retail investors with a way of getting exposure before the crowds pile in when the company is listed on the stock market”.

Source: AIC / Morningstar and investment trust managers (as at 02/06/2026 based on latest available published portfolio weights).

What are Anthropic’s growth plans?

The fundraising announcement also detailed recent expansion of its compute capacity, including signed agreements with Amazon, Google, Broadcom and SpaceX. It said Claude was the first frontier model available on the three largest cloud platforms, Amazon Web Services (AWS), Google Cloud and Microsoft Azure, with AWS its main cloud provider and training partner.

Alfred Lin, partner at Sequoia Capital said: “Startups and Global 5000 companies alike are deploying Claude to handle complex workflows, and in doing so, Claude is learning how businesses actually operate: the context, the processes, the judgement. Anthropic is building the bridge between where enterprise AI stands today and where it’s headed.”

Since its series G round in February, the company said adoption has grown across global enterprise customers and its run-rate revenue (a company’s estimated annual revenue based on a multiplier of a short-term, indicative period) crossed $47 billion.

As a public benefit corporation (PBC) Anthropic is a for-profit company that prioritises its purpose of “the responsible development and maintenance of advanced AI for the long-term benefit of humanity”.

While not yet confirmed, as a high-profile tech company, the stock is expected to list on the Nasdaq exchange. These recent announcements suggest it has now overtaken its rival OpenAI in the race to go public, allowing it to exploit surging investor demand for all things AI.

Anthropic, OpenAI and SpaceX are being touted as the three landmark listings set to take place in 2026 that are changing the playbook for IPOs, including how index providers are facilitating their inclusion in benchmark indices.

Alphabet’s shares fell by 3.9% on 2 June following news that the company was raising $80 billion in fresh capital to fund increased spending on artificial intelligence (AI).

According to a 1 June statement from Alphabet (NASDAQ:GOOGL), a Magnificent 7 stalwart and parent company of Google, the new capital will be used to fund “general corporate purposes, including capital expenditures to scale AI infrastructure and global compute”.

The funds are being raised largely by issuing new shares. That means that each share now gives its holder a smaller portion of the overall ownership of Alphabet’s equity – this effect is known as ‘dilution’.

“Alphabet is reversing its long-held capital allocation policy of buying back shares and issuing $80 billion in equity,” said Michael Field, chief equity analyst at investment research company Morningstar.

Despite this, $80 billion doesn’t represent a substantial dilution – it is less than 2% of Alphabet’s total market capitalisation (market cap) of $4.4 trillion.

The structure of the fundraise will also lessen the impact on Alphabet’s shareholders. Only $30 billion worth of new shares are being issued on public markets initially, with a further $10 billion being sold to Berkshire Hathaway (the conglomerate run by legendary investor Warren Buffett until last year) through a private placement.

The remaining $40 billion of shares will be drip-fed into the market through an ‘at-the-market’ (ATM) offering, beginning in Q3 2026.

Why is Alphabet raising more capital?

AI is pushing Alphabet as well as other big tech companies away from their capital-light roots, into a more intensively competitive spending environment.

Alphabet and its competitors “are now burning through cash to win the AI race”, said Morningstar’s Field. “Public equity is the cheapest source [of cash] available, particularly in a rising interest rate environment.”

Gaining leadership in this emerging field is a priority for Alphabet. Its statement in relation to the capital raise highlighted strong demand for its AI solutions and services, and referenced the $180-190 billion in expected capital expenditure for 2026 that it forecast in its Q1 earnings call.

There is an argument that Alphabet is one of the best-positioned companies to capitalise on AI.

“They benefit from owning the full technology stack – from the Tensor Processing Units (TPUs) that perform the AI calculations, through leading-edge AI software models including Gemini, as well as having strong consumer reach through Google search, Android devices, and Chrome,” James Ashworth, co-portfolio manager of Brunner Trust told MoneyWeek.

“Like many of the other hyperscalers, Alphabet is seeing unprecedented customer demand for AI compute,” Ashworth continued. “It is clear that Alphabet sees this as a time to increase its investments to support what it sees as a significant growth opportunity ahead.”

Alphabet stated that it will also use the proceeds to pay the costs of certain ‘capped call’ contracts it expects to enter into in order to reduce the potential dilution to its shares, while the ATM mechanism is expected to facilitate a change in how Alphabet meets its tax obligations associated with employee equity grants.

Should you invest in Alphabet shares?

Whether or not Alphabet shares make a good investment for you depends on your personal circumstances and investment goals.

As of 1 June, Alphabet’s Class A shares trade at a forward price/earnings (P/E) ratio of just under 27. That puts Alphabet right in the middle of the Mag 7 in terms of value.

^{Source: Yahoo Finance}

This suggests that Alphabet is reasonably priced in the context of the wider Mag 7 group. However, this group has a reputation for being highly valued, with those valuations based largely on optimism over future AI growth. Buying shares that are valued like this comes with risks, should (for example) AI adoption rates slow or macroeconomic factors hinder these companies’ growth.

Why do Alphabet shares have two symbols?

Alphabet is an unusual company in that its stock trades under two different symbols: GOOG and GOOGL.

These represent two different share classes. GOOG corresponds to Alphabet’s Class C shares; these don’t have voting rights. GOOGL corresponds to Alphabet’s Class A shares, also known as common stock, which confer one vote per share for holders.

The voting rights that GOOGL stock permits mean that these sometimes trade at a slight premium to GOOG shares, but their values are usually very close as both give shareholders equal access to Alphabet’s profits.

Alphabet has a third share class (Class B) which isn’t traded publicly. It is held by the company’s founders and insiders. These shareholders can exercise 10 votes for each share they hold.

How to invest in Alphabet shares

If you want to invest in Alphabet, the most direct way to do so is to buy its shares directly. Most investment platforms or brokers will enable you to buy its stock.

If you haven’t bought US-listed stocks through your broker or investment platform before, you may need to complete a W-8BEN form – a simple form that entitles you to a reduced tax rate in the US on your investments. Your broker will prompt you for this if and when it is needed.

You may prefer to invest in funds rather than individual stocks, and some investment platforms only support fund investments. In that case, if you want to buy Alphabet shares, you’ll want to look for funds that have a high weighting towards the company.

Any exchange-traded fund (ETF) that tracks the MSCI World Communication Services Index will have a very high weighting in Alphabet, since the index is strongly weighted towards Alphabet shares. As of 30 April, Alphabet’s two share classes made up the index’s top two constituents and accounted for approximately 52% of the index between them.

The iShares MSCI World Communication Services Sector Advanced UCITS ETF (LON:IUCM) tracks the S&P 500 Capped 35/20 Communication Services Index, which limits its weighting to 35% for the largest stock and 25% to the second-largest. It holds both Alphabet share classes, with their combined weighting accounting for just over 30% of the fund’s holdings as of 29 May.

Some investment trusts can also offer exposure to Alphabet’s shares. It is the largest holding in Allianz Technology Trust (LON:ATT) with 10.0% of assets as of 30 April, as well as the Brunner Trust (LON:BUT) where it makes up 5.5% of the portfolio as of the same date.

Alphabet shares account for a combined 8.5% of Polar Capital Technology’s (LON:PCT) portfolio as of 30 April, though that makes it the second-largest holding behind Nvidia, which makes up 8.9% of the portfolio.

After weeks of anticipation, SpaceX’s initial public offering (IPO) took off on 12 June, with shares in Elon Musk’s space and artificial intelligence (AI) company gaining 20% to close at $160.95 on their first day of trading.

SpaceX (NASDAQ:SPCX) has pioneered the modern space economy. Its Starlink network consists of over 9,000 satellites that provide internet connectivity all over Earth, while its rockets facilitated more than 80% of the US’s licensed space launches in 2025.

“SpaceX shares blasted higher on their stock market debut, shooting past the $135 IPO price as investors rushed to buy into Elon Musk’s vision for space, satellite and AI domination,” said Susannah Streeter, chief investment strategist at wealth manager Wealth Club. “The IPO had reportedly been at least four times oversubscribed, leaving many investors without an allocation and forcing them into the secondary market once trading began.”

This was the first IPO that allowed UK-based investors to buy shares ahead of the event.

Having raised $75 billion for SpaceX, the IPO became the largest in history. It raised more than twice as much as the previous leader, Saudi Arabian state oil company Saudi Aramco, raised in its 2019 IPO.

It means SpaceX’s founder and CEO, Elon Musk, became the world’s first trillionaire – though it will be some time before he can sell SpaceX shares and realise the increase in his nominal wealth.

How much was SpaceX worth at its IPO?

While the $1.77 trillion valuation at which SpaceX shares initially sold had raised some eyebrows, the gains over the course of its first session saw the company close with a market capitalisation of $2.11 trillion.

That puts SpaceX at number seven in the list of the world’s most valuable companies – in between semiconductor giants Taiwan Semiconductor and Broadcom.

Shares opened at $150 – already 11% above the $135 IPO price – and never fell below $149.3 on the day. SpaceX stock reached a high of $176.5 during their first session trading on public markets.

SpaceX’s IPO filing envisages a $28.5 trillion total addressable market (TAM), the vast majority of which ($26.5 trillion) is ascribed to AI. Within AI, even eye-catching segments like AI infrastructure are a relatively small portion of the total (expected to be worth $2.4 trillion); enterprise applications – in other words, AI products sold to businesses – are expected to account for $22.7 trillion, around 80% of SpaceX’s entire TAM.

Space-enabled solutions, by contrast, are expected to account for just $370 billion, or 1.3% of SpaceX’s TAM, while connectivity (Starlink Broadband and Starlink Mobile) are expected to make up another $1.6 trillion, or 5.6% of the TAM.

What could SpaceX’s IPO mean for the markets?

Many experts believe that the success of SpaceX’s IPO could pave the way for yet more mega-cap tech IPOs.

AI developers OpenAI and Anthropic have both filed for IPOs since the start of June, and other private tech giants like Databricks, Stripe and Anduril could follow. This could potentially create “a wave of new market capitalisation large enough to reprice growth equities more broadly” according to Stephen Dover, chief market strategist at investment manager Franklin Templeton.

However, there are risks posed by the prospect of so many huge private companies entering public markets at the same time.

“If several mega-cap IPOs come in the same window of time, they will compete for capital not only with each other, but also with existing publicly traded growth stocks,” said Dover. “That could create rotation pressure across software, semiconductors, fintech, defence tech and AI beneficiaries.”

Dover also cautioned that the increased scrutiny of public markets could test the valuations of these private companies, most of which have raised large amounts of money at very high valuations over the latest business cycle.

Others, however, viewed the success of SpaceX’s IPO as a positive.

“The positive SpaceX debut and investor reception is a good sign for OpenAI and Anthropic as both companies likely head down the IPO path before year-end,” said Dan Ives, head of global technology research at investment bank Wedbush Securities. “As tech stalwarts like SpaceX, OpenAI, and Anthropic get more capital and go public this will… further drive more investments and [capital expenditure] into the AI revolution flywheel.”

How can you invest in SpaceX?

Before investing in SpaceX, it is important to consider the risks involved. The company listed at a very high valuation – around 100 times sales, rising to around 109 times sales by the close of its first day trading – and lost nearly $5 billion last year. Nvidia, by comparison, trades at around 20 times sales.

Now that SpaceX has listed publicly, most brokers that enable trading in US-listed shares should enable you to buy its stock, like that of any other listed company.

If you haven’t bought US-listed stocks through your broker or investment platform already, you may need to complete a W-8BEN form – a simple form that entitles you to a reduced tax rate in the US on your investments. Your broker will prompt you for this if and when it is needed.

There are various ways to gain exposure to SpaceX besides buying its shares directly. You could, for example, buy an investment trust that holds the stock, such as Scottish Mortgage (LON:SMT). Shares in Scottish Mortgage gained 1.7% on 12 June, the day of SpaceX’s IPO.

Investors on both sides of the Atlantic are likely to have come across the term ‘Magnificent 7’ – a moniker used to describe a group of ‘big tech’ companies that have dominated industry headlines and stock market returns in recent years.

These seven technology giants – Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta and Tesla – enjoyed a collective surge in share prices that began in 2023. Their impressive returns were powered by a massive appetite for all things artificial intelligence (AI), a concentrated US stock market and each demonstrating strong financial performance.

The Mag 7 represents around a third of the S&P 500 by market capitalisation. According to investment manager Mellon, in 2023 the group returned 76% against the wider S&P 500’s 24%. As of May 2026, their year-to-date performance is 8.8% compared with the overall S&P’s return of 8.1%.

This suggests their relative success may be slowing, with several market commentators wondering if the collective party may be splintering.

Is the ‘Mag 7’ story over?

Neuberger Berman co-chief investment officer, multi-asset strategies Jeff Blazek said while Alphabet, Amazon and Meta all delivered Q1 results that surpassed analyst expectations, the cohesive performance of the wider group may have run its course.

“The ‘Magnificent 7’ moniker has had a good run. But the basket is beginning to break at the same time more granular AI-related equity stories are gathering momentum,” he said.

While several continue to impress, “the story of seven stocks moving in unison to dominate large cap indices may be reaching its end,” Blazek added.

All seven remain heavily exposed to AI, appetite for which shows no signs of easing. Quite the opposite, in fact.

Helen Jewell, international chief investment officer of fundamental equities at BlackRock, said AI looks set to continue to attract huge levels of investment.

“AI capital expenditure is now $725 billion for 2026 and we expect that to reach $6 trillion by 2030 – an extraordinary amount of money is being spent on AI.”

But she also points out that the expected divergence between the seven companies will be determined by their breadth of offering.

She said: “A company like Alphabet has more elements across that whole AI stack – computing, cloud, models, applications. Others are more exposed to the parts of the stack seen to be less strong. Software, for example, is seen as a weaker part of the AI story because there’s a feeling that AI will be able to replicate a lot of what software does.”

While the term was useful in describing their shared characteristics, Jewell said it will become outdated as the divergence that’s already started to emerge continues.

Where are the Mag 7 differences showing up?

While these acronyms can help investors looking for an interesting, memorable narrative, it’s important to look beneath the marketing story.

Neuberger Berman’s Blazek explained: “The Mag 7 story no longer reflects how these companies are actually behaving and it no longer serves investors trying to make sense of where markets are headed.”

He said their average pairwise correlations – the rate at which two stocks move together – have fallen significantly since their heyday.

In 2023, this was 75%, whereas it’s now 25% – the lowest level since 2019.

As at mid-May, Neuberger Berman said year-to-date returns ranged from Alphabet’s 23% to Tesla’s loss of 15% – a “striking” divergence in such a short timeframe.

“Consider Alphabet and Microsoft specifically: a year ago, the former was written off as lagging badly on AI, while the latter was deemed a consensus winner. That read has inverted – starkly,” Blazek said.

Beyond the Mag 7, where should investors look next?

Trying to second-guess markets or time share price movements is challenging – even for professional investors.

James Norton, head of retirement and investments at Vanguard Europe points out that people described Mag 7 valuations as being stretched for years. If anyone was spooked by that narrative they might have sold out and missed out on a lot of returns.

Clearly this year’s performance to date has been more mixed. As it’s hard to predict future share price trajectories, taking a diversified, long-term approach is more sensible than trying to time a specific theme.

Norton added: “For investors with a diversified portfolio, these companies are just one part of the picture. It is true that historically quite a small number of companies have driven a large share of overall market returns. But in a diversified portfolio, the Mag 7 are just a part of the returns of the US market, which are in turn part of the returns from the global market, which are again balanced by the returns you are also getting from bonds.”

Are the Mag 7 stocks overvalued?

Jewell doesn’t like calling stocks ‘expensive’.

“Ultimately the multiple reflects what people think the future earnings growth is going to be. The reason Alphabet is demanding a higher price is because there’s a feeling that its earnings growth is going to be strong because they've got so many different parts of the AI story,” she said.

The other point to note is that the divergence of performance starting to emerge is not a static story for these types of companies.

Their ambition, attitude and high levels of cash flow means their ability to continually reinvest themselves is part of their power.

Jewell added: “As the oldest of the Mag 7, Microsoft is a phenomenal company that has gone through many iterations. It reinvents itself continually – as does Apple – because they’ve got the cash to rethink and recreate what they do, which is what allows them to sustain for the long term.”

In times of uncertainty, it is comforting to have in your portfolio some substantial, growing companies with leading market shares in stable sectors such as healthcare. A good example is Intuitive Surgical (Nasdaq: ISRG), the global leader in robotic surgery. Intuitive Surgical has more than 11,000 of its da Vinci robotic surgery systems and over 1,000 of its Ion robotic endoluminal biopsy/minor procedure systems installed in hospitals in 70 countries worldwide. The surgeon controlling one of these systems sits at a console with a magnified three-dimensional view of the operating site and controls instruments that have a greater range of motion than the human hand.

Intuitive Surgical has a 60%-70% market share globally of the installed base of robotic surgery systems and a share of about 80% of general soft-tissue systems (excluding niches such as orthopaedics). The market for robotic surgery is growing from a predicted $16 billion in 2026 to $64 billion in 2035, a compound annual growth rate (CAGR) of 16.5%.

Intuitive Surgical has a wide moat

Intuitive Surgical has four features that amount to a wide moat protecting its dominant market share. First is its substantial investment in the research and development of new products – more than $1.3 billion in 2025 – including fifth-generation da Vinci systems that are now in production. Second is its set of more than 4,500 patents protecting its high-tech systems from being copied by competitors.

Third is its unparalleled surgical database gained from more than 20 million surgical procedures carried out using da Vinci systems. This database is used continuously to improve the AI and software incorporated into Intuitive's systems.

Finally, there's Intuitive's da Vinci robotic surgery training scheme, which has trained more than 66,000 surgeons around the world. Surgeons trained on da Vinci systems who plan to move to a new hospital naturally ask that hospital to install a da Vinci system.

Additionally, there are three factors driving further growth. The first is the advantage of robotic surgery over conventional surgery; it is minimally invasive (keyhole) surgery, which ensures shorter hospital stays and improved patient outcomes (for example, fewer complications). That is why robotic surgery is growing at a CAGR of 16.5% .

The second is the application of robotic surgery to more procedures ever since the first two procedures – gall bladder removal and prostatectomy – were approved by the US regulator in 2000. For example, the early 2026 regulatory approval given to da Vinci 5 systems for nine different cardiac procedures clears the way for 160,000 minimally invasive heart procedures in the US and Korea alone.

The third is the extension of Intuitive's reach to more hospitals and more countries. A country is usually served by distributors initially, but as business grows Intuitive starts to serve customers directly to provide a more comprehensive service. In March 2026, Intuitive began direct operations in Italy, Spain, Portugal and Malta by acquiring the existing distributors there. This is likely to result in faster growth.

Intuitive Surgical's 2025 results show revenues up by 20.5% to $10.065 billion. Pre-tax profit was $3.31 billion, up 23.8%. Diluted earnings per share for 2025 was $7.87, up 22.6%. The balance sheet is strong, with more than $9 billion in net cash. Strong growth continued in the first quarter of 2026, with revenue up 23% compared with the first quarter of 2025. Keep buying.

How Intuitive Surgical has performed

This base is important as about three-quarters of revenue comes from instruments, accessories and services. This revenue increases as the number of surgical procedures carried out on the machines rises. In the first quarter of 2026, revenue was $2.77bn, up 23% on the same period the year before, with da Vinci procedures up 16% and Ion procedures up 39%. And the recent approvals for nine new cardiac procedures using da Vinci 5 could add another 160,000 procedures in the US and Korea alone.

The installed base rose with new sales – 431 da Vinci systems and 52 Ion systems were placed in the first quarter of 2026. The total for da Vinci systems included 232 da Vinci 5 systems compared with 147 in the same period last year. The new direct sales organisation for southern Europe should enhance sales there.

Intuitive Surgical expects a gross profit margin of 67.5%-68.5% of revenue compared with 67.6% in 2025 (on a non-GAAP basis). This includes the impact from tariffs of 1% of revenue. Given that Intuitive has a history of under-promising and over-delivering, this implies that the ex-tariff margin is likely to rise.

Most of the 38 analysts covering the stock rate it a “buy” (19) “overweight” (6), with 11 opting to “hold”. The forward price-earnings (p/e) ratio for 2027 at the recent price of $420 is 36.7 falling to 31.6 for 2028. The average one-year target price is $582. There is no dividend, but the firm's strong financial position enabled it to spend $2.3 billion on share buy-backs in 2025, which supported the share price. This is a profitable growth stock worth adding to your portfolio.

Dr Michael Tubbs owns shares in Intuitive Surgical

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

Scottish Mortgage has confirmed its holding in space exploration start-up SpaceX is valued below the level the firm is rumoured to be targeting at its upcoming initial public offering (IPO). That could potentially mean an uplift in Scottish Mortgage’s value at the time of the listing, if SpaceX achieves the rumoured price tag, though experts caution that IPOs can be volatile and unpredictable periods.

Managed by Baillie Gifford and one of the UK’s most popular investment trusts, Scottish Mortgage (LON:SMT) invests in innovative companies in which it sees the potential for long-term growth.

As of 30 April, SpaceX – one of the major players in the burgeoning space economy – is Scottish Mortgage’s largest holding, accounting for 18%% of the portfolio.

“Scottish Mortgage first invested in SpaceX in December 2018, deploying capital through to August 2021, with a total investment of £151 million (approximately $200 million at the time of purchase),” said Tom Slater, manager of Scottish Mortgage. Despite no additional capital having been invested since then, Slater confirmed that “SpaceX has been the trust’s largest contributor to returns over one, three and five years, and the fifth‑largest contributor over 10 years”.

Since SpaceX is a private company, its shares don’t trade daily like those of a listed company. That means its value doesn’t fluctuate day by day; instead, it changes intermittently during specific ‘liquidity events’, when insiders sell shares on private markets.

SpaceX is expected to list later this year, and, according to reports, could target a value as high as $1.75 trillion. While this valuation hasn’t yet materialised – and may not, depending on what happens when the company lists – there is an expectation within the market that it could soon be worth this much.

That poses a conundrum for funds and investment trusts that hold its shares. What are they really worth – their level at the company’s last liquidity event, or its rumoured value at a future IPO?

Scottish Mortgage reveals SpaceX valuation

Scottish Mortgage confronted this question in a briefing note on 12 May clarifying that, as of 31 March 2026, the trust values its SpaceX holding based on a $1.25 trillion valuation. This follows “a revaluation during the first quarter as secondary market transactions were rebased to reflect the merged valuation of SpaceX and xAI” – the latter being the artificial intelligence start-up founded, like SpaceX, by Elon Musk.

The trust also clarified that its valuations for SpaceX and other private companies it holds are based on “verifiable transactions rather than market commentary or press speculation” and that they are determined by Baillie Gifford’s valuations team as well as an independent third-party provider, S&P Global.

Even at this valuation, SpaceX has delivered excellent returns for Scottish Mortgage since its initial investment.

“As at 31 March 2026, the holding was valued at £2.98 billion (approximately $3.94 billion), representing an increase of around 19 times the original investment,” said Slater.

But given the rumoured IPO valuation is 40% higher that the trust is currently marking them, could a value bump await Scottish Mortgage shareholders as and when SpaceX lists?

How might a SpaceX IPO impact Scottish Mortgage?

It’s hard to say how a SpaceX IPO could impact the investment trust. For one thing, Scottish Mortgage made it clear in the briefing note that at this stage there is no clarity over what restrictions may apply to existing shareholders post‑listing. They could be subject to a lock-up period – a defined period after a company IPOs, usually 90-180 days – during which major pre-existing shareholders are not allowed to trade their shares.

“Even if SpaceX shares jump to the rumoured IPO valuation level, the Scottish Mortgage management team may not be able to take profits initially,” said Ben Johnson, senior analyst at investment manager Charles Stanley. “The team have made their peace with this and have communicated this clearly.”

The market may also have started to price future gains in already. While the average UK investment trust trades at a discount to its net asset value (NAV) of around 12%, Scottish Mortgage trades at a premium of around 3.5%.

This probably reflects broad optimism over the trust’s strategy, which leans heavily into growth and tech stocks, according to Chris Beauchamp, chief UK market analyst at investing platform IG, but could also in part reflect the market’s expectation that its SpaceX holding might soon increase in value.

But Beauchamp also cautioned that there is a risk of volatility following any tech IPO.

“It’s a different world once you’re a public company,” said Beauchamp, thanks in large part to increased scrutiny over business fundamentals.

Companies like Meta (formerly Facebook) and Musk’s own Tesla endured share price declines in the aftermath of their respective IPOs.

“The risk with IPOs is that people [who have already invested in the company] are looking for an exit,” said Beauchamp. “There’s so much wealth tied up in it they want to realise, understandably.” This can lead to a high appetite to sell.

“Investors should expect significant volatility in the Scottish Mortgage share price during and after the IPO,” said Johnson. “The trust has never had such a big weight in a single name.” He highlighted, though, that the last company in which the trust had a high double-digit weighting was Tesla, “which proved to be one of its most successful ever investments” over the long term.

While AI is the main investment theme in the markets at present, robotics is also increasingly in the spotlight. Almost every day we see a new headline about a robot running a marathon, breakdancing, or beating a human at table tennis. Most experts predict a vast jump in the number of droids within the next few years. But not every robotics stock is worth buying. Some companies produce ideas that just don't work, face too much competition, or have shares that have become absurdly overpriced. That brings me to Serve Robotics (Nasdaq: SERV).

Serve Robotics’ business model appears plausible enough. Many people spend large amounts of money on takeaways delivered to their homes. This “last-mile” delivery takes time, costs money (either upfront or in tips) and causes pollution and congestion (if delivered by car). Occasionally, deliveries can get lost. In theory, Serve Robotics' delivery robots, which look like a box on wheels, can cut out this cost by taking food from restaurants to customers, navigating roads and pavements. As of February 2026, the group had around 2,000 robots in operation.

Serve Robotics is facing an uphill struggle

However, there are several flaws in the business model. While the technology has greatly improved over the past few years, Serve's robots still get stuck or lost, while there are also ongoing concerns about food theft. Serve Robotics also faces competition from a host of other providers, such as Coco Robotics and Starship Technologies, which are also pursuing similarly aggressive expansion plans. Many of the major food-delivery firms, moreover, are exploring other in-house solutions, such as self-driving cars or drones.

An even bigger difficulty is that the robots are deeply unpopular with many people, at least in America. Part of this is due to genuine concerns that they are creating a hazard for pedestrians, especially the elderly and those with disabilities, and other road users. Some people just find the idea of robots roaming the streets unnerving, and vandalism has also been a problem.

There are widespread calls for them to be banned, while parts of San Franciso and Chicago have blocked, or severely restricted, their expansion. The robots aren't popular with restaurants either. Research by short-seller Edwin Dorsey suggests that many restaurants have ditched them because they delivered few or no cost savings.

To cap it all, Serve is projected to keep losing money for the next few years, yet the shares are priced for perfection, trading at a whopping 20 time forward sales and 262 times current revenue – far more than the ratio of between seven and ten that most fast-growing technology firms can command.

The market seems to be taking a similarly negative view, with the stock down 50% from its 52-week peak and trading below its 50-day and 200-day moving averages. I therefore suggest you go short Serve Robotics at the current price of $9.40 at £100 per $1. I would put the stop-loss at $18.40, which gives you a total downside of £900.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

At Janus Henderson's North American Income Trust (NAIT) we focus on US income stocks – quality franchises that consistently generate cash and have disciplined capital-allocation policies focused on investment in the business to sustain competitive advantage while paying a progressive, covered dividend. Surplus cash beyond this may be used for bolt-on mergers and acquisitions, or to repurchase shares when the stock is dislocated from long-term assessments of fair value. The NAIT has a strong record of paying a progressive dividend and growing revenue reserves since the fund's inception in 2012 (it was converted from the Edinburgh Tracker Trust). The average dividend in the portfolio is 3% and dividend growth averages an attractive 6%-7%.

Our revenue reserves can comfortably cover one year of payouts and may be used if needed. However, there was only one small dividend cut during the 2020 pandemic period and none since then. Many UK investors may not automatically think of US income stocks, but there are several that offer attractive and growing dividends. The US has a history of superior earnings growth, which can often translate into higher dividend growth, too.

How to gain exposure to US income stocks

Dell (NYSE: DELL) is a technology infrastructure company uniquely positioned to grab a slice of the next wave of corporate spending on AI applications. Its scale, global supply chain and deep relationships with customers from the private and public sectors make it a preferred supplier of AI servers and data-storage technology. As enterprises move from experimentation to deployment, Dell will benefit from recurring technology update cycles. Growing profitability is supported by the company's shift toward higher-value technology infrastructure and its disciplined cost management. Debt has been cut and capital returns support the yield. We believe Dell's valuation fails fully to reflect the durability of demand and the firm's exposure to capital expenditure on AI.

Johnson & Johnson (NYSE: JNJ) is another US income stock that offers a rare combination of earnings quality and durable growth. Following the spin-off of its consumer-health division in 2023, it is a focused, innovation-driven pharmaceutical company and a leader in medical technology that should comfortably deliver mid-single-digit revenue growth. It has a diversified drug pipeline, which reduces risk, and its franchises in oncology, immunology and cardiovascular treatments are best-in-class, which will support cash flows in the long term. The medical-technology sector is growing strongly and the worst seems to be behind the company when it comes to legal issues. This is restoring investors' confidence and valuations. With a strong balance sheet, consistent free cash flow and a long record of dividend growth, Johnson & Johnson remains a core holding in volatile markets.

Morgan Stanley (NYSE: MS) is a global leader in the capital markets. Its earnings have become more resilient following a strategic pivot toward wealth and investment management, which generates stable, fee-based revenues. These annuity-like income streams provide downside protection while preserving upside exposure to appreciation in the markets and net asset inflows. The firm's strong capital position is enabling it to buy back shares and grow dividends. We believe Morgan Stanley's improved position will deliver impressive gains tied to long-term growth in the financial markets.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

Space is coming closer to home, playing an ever-increasing role in our lives. And like the universe itself, the investment opportunities are expanding rapidly.

Space consultancy firm Novaspace estimated the size of the space economy at $626 billion, in 2025, with $236 billion accounted for by the space market and $329 billion by space-enabled applications.

While the space races of the mid-late 20th century were primarily driven by government spending, this time it’s different. Private companies now provide around 70% of the capital for space exploration, meaning that investors have unprecedented access to the growing space economy.

Why is all this money being spent on space? What’s the payoff for sending all these payloads into orbit?

There’s two types of answers. There are some space applications that impact the economy on earth, and others are related to the impact of the growing economy that exists outside the atmosphere.

At present, almost all the revenue that is generated from space pertains to space-enabled applications on earth. Think GPS trackers, or satellite-enabled internet connectivity: essentially, satellites are sent into space to provide information or functionality of some sort to what happens on earth.

In itself this is driving tremendous value, but the biggest rewards could be on the applications that remain in space.

The future of the space economy

The recent Artemis moon flight underscored the fact that moon landings are now the focus of attention once again. NASA is up front about the fact that putting astronauts back on the moon’s surface in the 2020s will provide the experience and technology to conduct the first human missions to Mars.

Professional services firm PwC estimated in January that the Lunar economy could be worth $127 billion by 2050. NASA, meanwhile, estimates that ‘Moon to Mars’ programs could create 69,000 jobs and support over $14 billion in total economic output.

There is all sorts of economic activity that can take place in space itself, and the potential of these is only just starting to be explored. These include mining asteroids for key resources, running data centres in space, or constructing research labs that take advantage of zero-gravity and other unique conditions in space.

Activities like these are “technologically nascent”, says Evelyn Chow, portfolio manager of Neuberger Berman's Next Generation Space Economy Fund, “so the ability to commercialise it is still some time away”. Orbital data centres, for example, would still be prohibitively expensive to launch, even if the solar power and semiconductor hardware going into them could withstand the level of radiation they would be exposed to in space.

“Based on estimates that we’ve run, it costs something like 8-10 times more per megawatt to do orbital data centre power versus even gas turbine power today,” said Chow.

But this could change in future.

“If you go back to the 50s and 60s, the first Apollo missions, it cost around $400,000/kg to launch something into space,” says Chow.

Analysis from ETF issuer ARK Invest shows that launch costs have fallen from approximately $15,600/kg to less than $1,000/kg in the 17 years since 2008.

Analysis from Google suggests launch costs could fall to $200/kg by the mid-2030s. At this level, the costs of running data centres in space would be comparable to the energy costs of AI on earth.

One of the key innovations has been reusable rockets. It’s an obvious point, but if you use a rocket twice rather than once, you double the return you make on building it in the first place (besides, of course, any extra costs you incur in re-using it).

Satellites themselves have also become much cheaper. Low-earth-orbit (LEO) satellites tend to be smaller and cheaper to launch than other types, and smaller satellites are increasingly dominant in our skies. That is driving an increase in the total number of satellites that can be launched: according to Chow, there are now approximately 15,000 satellites in orbit and some experts think that could rise to around 100,000 by 2030.

SpaceX: IPO and beyond

One of the major driving forces behind many of these costs coming down has been Elon Musk’s Space Exploration Technologies (SpaceX).

Its reusable rocket, Falcon 9, has brought the incremental costs of launch down to around $1,500/kg, and according to Chow its upcoming Starship model could halve this cost.

SpaceX dominates the launch industry. According to the US Federal Aviation Administration, of 199 licensed space launches last year, SpaceX launched 161 – giving it more than 80% of the total market share.

As well as monetising these launch services, SpaceX also has a network of over 9,000 satellites comprising its Starlink network which provides internet connectivity across the face of the earth. Starlink is thought to generate 50-80% of SpaceX’s revenue.

Interestingly, SpaceX also owns xAI, which develops the chatbot Grok and the social media network X (formerly Twitter). So there is an artificial intelligence (AI) angle on SpaceX too.

“Running AI requires immense power for storage and processing, and Musk reckons the only way to scale up is to tap into solar power from space,” said Dan Coatsworth, head of markets at AJ Bell. “SpaceX plans to use its satellite network to operate as orbital data centres, while at the same time Musk wants xAI to become a leading AI provider. Therefore, parking the two companies together means SpaceX can power AI in multiple ways.”

At present, SpaceX is a private company, so most investors can’t buy its shares directly – though there are various ways you can get exposure, which we’ll get into shortly.

It isn’t going to be private for long, though. SpaceX is reportedly filing for an IPO that could make it one of the world’s most valuable companies – reports indicate that it is targeting a valuation of $1.75 trillion.

Once SpaceX goes public, you’ll be able to buy its shares like any other.

When will SpaceX’s IPO take place?

SpaceX’s IPO isn’t yet finalised but the latest reports suggest that it will take place in June 2026.

How much will SpaceX be worth when it IPOs?

The latest reports suggest that SpaceX could achieve a valuation of $1.75 trillion when it IPOs.

If that transpires, it would immediately make SpaceX one of the world’s most valuable companies. If SpaceX listed with a $1.75 trillion valuation today it would comfortably make the top ten list (though, ironically, it would push Musk’s company Tesla out of this list).

How to invest in SpaceX before its IPO

In the meantime, there are ways you can gain exposure to SpaceX. It is held by a number of funds and investment trusts.

Scottish Mortgage (LON:SMT), for example, has 19% of its portfolio invested in SpaceX – making it the largest holding.

While this isn’t exactly the same as investing in SpaceX, since less than 20p in every pound you put in will be held in SpaceX shares, it is a good way to get some exposure, putting you in a position to profit should the IPO reach or exceed expectations.

Should you invest in SpaceX’s IPO?

There is a caveat over SpaceX’s potential $1.75 trillion listing. While private companies don’t have to disclose financial details in the way that public companies do, KeyBanc analysts estimate that SpaceX made $21 billion in revenue last year. The rumoured IPO valuation is over 83 times that amount. That’s a lot – as of 23 April, Tesla trades at around 14 times sales, and Nvidia trades at around 23 times.

“Bulls might argue that SpaceX’s earnings growth potential is so great that valuing it using 2027 or 2028 forecast earnings might make the equity rating look less outrageous,” said Coatsworth. “Bears could respond by saying that SpaceX is too immature or too high-risk a business to warrant a sky-high valuation.”

So before you join the rush of investors looking to buy SpaceX during its IPO, it is worth considering the risks involved should it fail to live up to its stratospheric valuation in the long run.

How to invest in space

SpaceX competitors and space pure-plays

There are other alternatives to SpaceX if you do feel that the company is too richly priced, though it bears mentioning that many of these also trade at high valuations.

In terms of launch, one of SpaceX’s biggest competitors is RocketLab (NASDAQ:RKLB). Founded in New Zealand, RocketLab is now headquartered in Los Angeles and posted annual revenue of $602 million in 2025.

That revenue number is a small fraction of SpaceX’s rumoured sales, underscoring the fact that, while RocketLab is the second-largest launch company, it is still some way behind rivalling SpaceX’s dominance of this market.

Similarly, AST SpaceMobile (NASDAQ:ASTS) is the second-largest provider of internet connectivity, behind Starlink.

Companies like these are pure-play space stocks. Many of them, though, while driving lots of revenue, are not yet profitable. For more established businesses that are tapping into the growing space economy, Chow looks at more diversified companies.

These include defence stocks like BAE Systems (LON:BA.) and Leonardo (MI:LDO), many of which can tap into space-related technology and revenue streams such as BAE’s contract with the US military for satellite missile tracking.

Angeline Ong, senior investment analyst at trading platform IG, says that the advantage of investing in defence/space double-plays is that they offer growth potential alongside the stability of government-backed contracts.

“Names like L3Harris (NYSE:LHX), RTX (NYSE:RTX) and Kratos (NASDAQ:KTOS) sit at this intersection - spanning satellite systems, communications, surveillance and missile technology - while players like BlackSky (NYSE:BKSY) add a data layer through geospatial intelligence used commercially and by defence,” said Ong.

Industrial firms like Mitsubishi Heavy Industries (TOKYO:7011) also offer diversified space exposure.

“Mitsubishi gets a lot of airtime for gas turbines and the AI boom, but of course, it's really, really critical to Japan's satellite manufacturing as well,” said Chow.

Space picks and shovels

That makes Mitsubishi a potential ‘picks and shovels’ stock for the space economy – the well-worn stock market adage being that it was the companies selling picks and shovels during the gold rush that made more money than the miners themselves.

“Don’t try to pick the winner - back the companies supplying all of them,” said Ong. “In space, that means businesses providing mission-critical components, satellite data and infrastructure - companies that benefit whether SpaceX or Rocket Lab wins the launch race, or whether Starlink or AST wins the connectivity battle.”

Canadian firm MDA Space (TORONTO:MDA) is favoured by Greg Eckel, portfolio manager of Canadian General Investments (LON:CGI).

The company provides components for space exploration companies, as well as constructing satellites, and builds the Canadarm robotic arm which will be used on NASA’s Gateway space station orbiting the moon.

“They have a $4 billion backlog,” said Eckel. “For a company that only has revenues of not even $2 billion yet, that’s a good indicator that something good is happening behind the scenes”. This is especially the case in the context of MDA having recently doubled satellite production capacity at its Montreal facility.

Italian solid rocket motor (SRM) manufacturer Avio (MI:AVIO) could also be worth a look.

“SRMs are probably one of the biggest defence pinch points globally,” said Chow. They drive propulsion for everything from rocket launches to missiles. “These SRMs are getting depleted at an astonishing rate, just in this Iran conflict alone,” said Chow. “They’re extremely specialised… maybe only half a dozen players globally are capable of making them, and Avio is one of the only scale players in this space.

Space funds and investment trusts

Ong picks out three funds and investment trusts that investors could turn to for space exposure:

• Seraphim Space (LON:SSIT)
• VanEck Space Innovators ETF (LON:JEDG)
• ARK Space & Defence ETF (LON:ARCX)

Scottish Mortgage is another option for investors who specifically want SpaceX exposure, though it should be noted that this is a diversified investment trust and isn’t specifically focused on space.

At the beginning of March, Aptiv, a global industrial technology company, approved the spin-off of its electrical distribution systems business into a new publicly traded company, Versigent (NYSE: VGNT). When the new company started trading at the beginning of April, it's fair to say investors were underwhelmed, to say the least. There were hopes that the market would be willing to pay up to $31 a share, but it closed the day below $28 per share.

Yet in 2025, the firm reported $8.8 billion in revenue, $528 million in net income and $893 million in adjusted earnings before Ebitda. The shares are up slightly since the initial public offering, but it is still only valued at $2.5 billion, which looks cheap relative to earnings. And unlike most spin-offs, which are often loaded with debt to offload liabilities from the parent firm, Versigent's leverage is only 1.3 times Ebitda, roughly the market average and well below the market median of 2.6 times, according to S&P Global.

Why is Versigent so unloved?

Versigent is one of those businesses that often fly below investors' radars, but that play an integral role in the global economy. With 138,000 employees in 25 countries, the group has a huge footprint and is deeply embedded in the supply chains of major manufacturers in the vehicle, agricultural and energy-storage sectors.

Officially, Versigent describes itself as “a global leader in the purposeful design and advanced manufacturing of low- and high-voltage electrical architectures”. In simple terms, this means the company designs, develops and manufactures components to help improve the efficiency of electrical systems in vehicles.

This is a highly specialised and labour-intensive process that the original equipment manufacturers have always been happy to outsource, giving Versigent a critical advantage. The group is already one of the top-three suppliers in every region in which it operates and its technology is embedded in one in every six vehicles produced globally (one in three for electric vehicles (EVs)). In addition, around 75% of sales are linked to full-service programmes, in which the firm becomes deeply embedded in electrical-architecture design early in the development process, tying the manufacturer and Versigent together through the design, development, testing and production phases.

In a world that's becoming increasingly dependent on electrical infrastructure and where vehicles are becoming smaller and smarter, the company's services are in demand. UBS has pencilled in revenue growth of 13% by the end of the decade, driven by rising demand for the high-voltage equipment it develops and sells to power network and battery-storage providers, and EV charging systems.

But growth isn't the story here; it's cash generation. Versigent will boast an Ebitda margin of 10.3% for 2026, according to UBS. The company has said it can drive 200 basis points of margin expansion by 2028, although UBS thinks 100 basis points is more likely (the base case). That would still be a near 10% increase on what is already a healthy level of cash generation.

Savings are expected to come from automation. At 80% of sales, manufacturing costs are the firm's largest overhead expense. Management has estimated that 30% of its workforce performs basic tasks, such as wire-cutting and stripping. In its two Chinese factories, these processes are mostly automated, and management wants to roll this out across the rest of its business. As a newly separated business, there are likely to be some additional costs in the short term as employees bed into new functions and the company fills positions previously overseen at the group level, but as an independent company Versigent should be able to identify and strip out costs faster than it would otherwise as part of a larger group.

Versigent is a cash cow

Versigent's appeal lies in its cash generation. UBS believes free cash-flow conversion on net income could hit 80% by the end of the decade. On top of that, analysts are only projecting “minimal capital spending” over this period (about $250 million per annum), so the majority of this should fall to the bottom line. For a company with an already healthy balance sheet, this implies that there will be a healthy amount of cash available to return to investors. Versigent's own projections suggest $1 billion of free cash flow over the two years to 2028 (UBS has pencilled in $830 million).

Cash returns could start imminently. Pre-spin-off, Versigent's management said it required only $400 million in cash for day-to-day liquidity, compared with about $700 million on the post-spin-off balance sheet. Coupled with its regular free cash-flow generation, Versigent could have somewhere in the region of $1.1 billionin extra cash in the next two and a half years to the end of 2028. Analysts at UBS have crunched the numbers on Versigent's potential and come up with some eye-catching figures. The firm's peers pay out around 23% of free cash flow as a dividend. At present, Versigent's average yield is about 2.2%. UBS estimates that if the company pays out 23% of free cash flow (about $170 million to the end of 2028), the shares could yield around 3%.

Assuming the company does not decide to go hunting for acquisitions, that would leave about $930 million for share repurchases, enough to buy back 42% of the group's current outstanding shares. Add that together and it seems as if Versigent has the potential to return about 44% of its current market value to shareholders by the end of 2028. If that isn't enough, the company is around 30% cheaper than its peer group valued by free cash-flow yield. Versigent appears to be somewhat of a hidden gem.

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Tesla is continuing its push into artificial intelligence (AI) and autonomy, but is having to spend big in order to do so. Is that making investors nervous?

Electric vehicle (EV)-maker Tesla (NASDAQ:TSLA) is frequently one of the most popular stocks among DIY investors. It is also one of the ‘Mag 7’ big tech stocks.

Tesla’s share price initially rose over 4% in after-hours trading following the announcement of better-than-expected results on 22 April, before slumping later. By the end of after-hours trading Tesla’s shares were 0.3% below their market close.

“Shares initially moved higher after Tesla’s latest results, with a big underlying earnings beat and broadly solid margins giving investors some early encouragement,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown. “Revenue was up for the first time since 2024, and free cash flow was a standout positive, but there are signs this was a softer beat than it first appeared, with some one-off or timing benefits helping flatter the numbers.”

Investors often look to Tesla’s CEO Elon Musk for characteristically upbeat commentary on Tesla’s future during its earnings calls, but his comments left markets flat this time around.

“The sticking points were familiar, but still important,” said Britzman. “Progress on robotaxis continues, with new cities added and miles driven rising, but the fully unsupervised rollout remains slow, and Musk’s comments suggest that a cautious pace will continue as the software evolves.”

What did its Q1 results tell us about Tesla – is the automaker’s business stalling, or is its drive into physical AI paying off?

Tesla’s results in detail

Tesla had been expected to post earnings per share (EPS) of $0.37 on revenue of $22.7 billion, according to consensus estimates from analysts polled by London Stock Exchange Group.

The results exceeded these expectations. Tesla reported adjusted EPS of $0.41 – up 52% year-on-year – with revenue up 16% to $22.4 billion.

However, there are some caveats over these seemingly positive numbers. The GAAP (non-adjusted) EPS figure of $0.13 implied just 8% earnings growth, suggesting that there had been a lot of one-off adjustments contributing towards the headline EPS figure.

Capital expenditure (capex) was another focus area, with spending during the quarter increasing 67% year-over-year to $2.5 billion. Tesla’s CFO Vaibhav Taneja indicated that capex for the year will increase to $25 billion – with Tesla having previously guided for around $20 billion – in order to support the development of six factories (some of which have already begun operation or will do this year) and the further rollout of AI initiatives such as robotaxis or the Optimus robot launch.

However, these investments mean that Tesla will see negative free cash flow for the rest of the year.

These forecasts appear to have spooked the market, with Tesla shares falling sharply in after-hours trading during the earnings call on 22 April.

Should you invest in Tesla?

Ultimately, whether or not you invest in Tesla depends on your personal circumstances and investment goals.

Big tech companies have the potential to deliver strong returns for investors.

However, they can also come with stretched valuations, and Tesla is a prime example of this; as of 22 April, it traded at a price/earnings ratio of over 355 – which is incredibly high. In order to justify this kind of valuation Tesla would have to increase its earnings rapidly over many, many years.

When stocks trade at multiples this high, it can lead to sharp selloffs in the short term if anything happens to dampen market expectations of this growth materialising.

“Ultimately, the valuation still leans heavily on Musk delivering breakthrough products that open entirely new markets,” said Britzman. “While progress is being made, last night’s comments were another example of the goalposts moving further out.”

For many years, software-as-a-service (SaaS) firms, which provide the digital utilities we use every day, such as Microsoft 365, have been prized for their consistent high returns. They are known for their high margins and predictable revenue and have become the foundation of many high-quality investment portfolios. People saw them as “fortress” businesses that could survive any economic conditions. However, in the first few months of 2026, that reputation has been shattered. A massive wave of selling has hit the sector, leaving many of the world's most highly regarded firms trading at their lowest valuations in years.

This drop comes from a growing fear about the AI revolution. Many now worry that AI might replace some of these companies entirely. The sell-off has been referred to as the “SaaSpocalypse”. It has created a major divide in the market. One side believes the SaaS industry is in permanent decline. The other sees a rare chance to buy superb businesses at a discount. The challenge is to tell the difference between a real risk and a distraction. That requires an understanding of where a company actually gets its strength and whether a piece of software is just a tool that anyone can copy.

Software-as-a-service firms fear AI could dismantle their business model

We are moving from a world where software was just a tool to one where software acts as an autonomous agent. This is easily the biggest change in the way business is done since the internet first arrived and might yet rival the industrial revolution in terms of impact. The fear for software firms is that AI might soon dismantle their competitive position. Things came to a head when one of the world's largest AI companies, Anthropic, released its latest tools, Cowork.

Part of the strength of software-as-a-service businesses is perceived to be the difficulty of writing and deploying code. Cowork threatened this by offering natural language programming. Essentially, anyone who can speak clear English can now code software into existence without having to learn how to code. For a few years now, AI has been a useful tool in helping coders improve their code, but Cowork goes beyond this. It can build a customised tool to manage specific work in comparatively little time. The reaction was panic.

The argument goes that if a non-coder can speak a project-management tool into existence, then why would they pay for an expensive software system designed by a third party? This threat of zero-barrier entry is what caused the SaaSpocalypse. Investors looked at the huge profit margins of SaaS businesses and instead of seeing it as a strength, as they have for years, they saw a target. There is a fear that white-collar work, such as processing invoices, will become commoditised. If the work of a lawyer or an accountant is mostly about following a process, then the software helping them is suddenly very vulnerable to a cheaper and faster AI alternative.

However, this fear might overlook how businesses actually work. The biggest threat from Cowork might not be to the software owners, but to the people using it. We are seeing a huge disruption in jobs because AI is great at replacing process-heavy tasks, such as auditing or conveyancing. Perhaps the most extreme example was fintech company Block, which recently announced that it would cut its staff from 10,000 to fewer than 6,000, with CEO Jack Dorsey saying, “intelligence tools have changed what it means to build and run a company”. Most probably, there will be many more similar announcements in the coming months and years.

But while the threat to jobs is clear, better or cheaper software doesn't always replace an established one. This is where the market seems to misunderstand the advantage of being the established player in a market. The strength of a business such as Sage, for example, which provides accountancy software to thousands of small businesses in the UK, isn't just about its range of features. Rather the software serves as a system of record; the single, trusted source of truth for the most sensitive data a business has.

Understanding nuance will bring profits

For the typical Sage user, the software is a tiny part of their costs, but their entire internal process is built around it. Switching to a cheaper AI-built alternative involves far more than “vibe coding” a replacement. Vibe coding is where a user describes the “vibe” or desired outcome of a program in plain English, and the AI writes the code, but relying on this for critical infrastructure involves a massive risk to the business. If an AI-generated tool makes a mistake, the consequences can be catastrophic. Even before the advent of AI coding tools such as Cowork, software testing has been a longer and more important process than the creation of the software itself.

There is also the so-called maintenance trap. Once software is being used it needs to be improved over time to meet the changing needs of customers. Building a prototype with Cowork is almost free, but maintaining that code and keeping it secure is a different problem altogether. Most businesses would rather outsource that responsibility to another company that stays on top of relevant law than carry the risk of mistakes themselves. For many, a third-party guarantee is worth more than the savings from using AI instead.

One area where software-as-a-service businesses might suffer is where they charge on a per-user or per-licence basis. Using Block's sharp reduction in staff as an example, if AI makes a worker twice as productive, a company might decide it needs 50% fewer workers. That means 50% fewer software licences to pay for. This is a problem for SaaS businesses that make money based on the number of people using their platform. To counter this, we will probably see a shift away from per-licence pricing toward models based on outcomes or usage. The winners will be the ones who can move from being a tool for individuals to becoming an enterprise-level system. The recent sell-off shows that the market hasn't distinguished between simple per-licence software and the mission-critical infrastructure that is built into the rules of a business.

The disruption is real, but it has layers. A new AI start-up can build a better sales tracker, but it can't easily build years of trust or a global network of trained users. In professional services, the skill that AI replaces is often just the manual part of the work. The value the software provider offers is the governance, the audit trail and the legal protection. As “vibe coding” becomes a more viable way to develop software, it allows more people to build their own tools. These unmanaged tools could, if not implemented with care, create a mess of data silos. That chaos often leads businesses back to the safety of a professional suite where the data are clean and there is a human to call when things go wrong.

The job of an investor is to find where the protection remains intact despite these technical challenges. AI is definitely pushing down the cost of making software, which theoretically could hurt profitability. However, it is also pushing down the internal costs for big software companies. A business such as Constellation Software, for example, can now maintain its products with much more efficiency. This could lead to rising profit margins even if growth slows down. The market panic has been so bad that it has treated every company the same. This lack of nuance creates opportunity for investors. If you look past the headlines about the death of software, there remain enduring moats built around mission-critical parts of a business or the long-term systems of record. Making sense of this really comes down to the difference between a simple software tool and the essential infrastructure a business cannot live without. When a firm handles the vital but repetitive tasks for an organisation, it becomes the main protector of its data and its processes.

The businesses well placed to survive the 'SaaSpocalypse'

The real opportunities are found in the businesses that control the primary system of record. These are much more valuable than the companies that just provide a tool for people to do their work. Sage Group (LSE: SGE), for example, is a perfect example of a business protected by its place in a company's daily workflow. It provides the accounting and payroll software that small businesses across the UK rely on. Many firms are required by law to use these tools for tax compliance. For most of them, the cost of Sage is a tiny part of their overall bills, but the risk of switching to another provider is massive. Staff are already trained on the system and moving years of data is a technical nightmare. In early 2026, Sage reported that its new AI tools were saving customers between five and ten hours of work every week on administrative tasks. This makes the product even more vital and should keep the steady subscription income flowing.

Experian (LSE: EXPN) is the world's largest credit bureau and manages 1.3 billion data updates every month. In a digital world that is currently struggling with fake identities made by AI, Experian's verified credit histories have become a vital filter for the global banking system. Its tools for analysis and decision-making are built into the lending platforms of major banks. The firm saw its organic revenue growth accelerate to 8% in late 2025. As banks need accuracy when they make lending decisions, they are unlikely to swap a trusted data source for unverified AI models. It has a vast dataset that third-party AI models are unable to train on and this control over data allows Experian to protect the business while its internal AI models can improve the quality of the analytics it provides.

Constellation Software (Toronto: CSU) is the owner of hundreds of tiny, niche software companies that handle essential tasks, such as bus routes or hospital billing. The cost of the software to the customer is usually low, but its importance is huge. The chance of a new AI start-up copying thousands of these specialised workflows is slim. And by using tools such as Cowork, Constellation is in a good place, cost-effectively to improve the software it sells. Moreover, the firm is currently using its cash to buy up tiny software businesses that have seen their prices fall due to fears about AI. By applying its own efficiency rules to these new buys, Constellation is turning the market's panic into growth.

Oracle (NYSE: ORCL) has moved past its old image of just being a database firm and is now a vital part of the AI sector. It makes up the digital plumbing of the global economy, handling everything from airline bookings to national banking systems. It has a huge advantage because it holds the key private data that AI needs to function. It is also putting serious money into the physical side of the business, with billions going into high-end data centres. This spending is massive and it has caused some tension in the market, but moving these essential tasks to a different provider is so difficult that customers tend to stay put.

Intuit (Nasdaq: INTU) is a similar business to Sage, but with different geographic exposures. It has successfully integrated AI into its business with its tax-agent model reportedly helping to find extra deductions that business customers were previously missing. These kinds of savings can quickly repay the modest cost of its QuickBooks service and has led to a customer retention rate of around 85%. For small businesses, QuickBooks Online serves as the main ledger and payroll system. While the tech for simple accounting has become cheaper, the difficulty of moving old financial data creates a very lasting relationship. Intuit is using AI to move into live services, further embedding it in customers' workflows. This helps protect the firm against any loss of income from having fewer people use the software. As with Sage, Intuit's software remains a necessity for smaller and mid-sized companies.

Relx (LSE: RELX) has moved on from being an old-fashioned publisher of journals such as The Lancet to becoming a provider of data analytics. By 2026, revenue from paper journals dropped to just 4% of its total sales as the business moved almost entirely online. Its legal and medical data sits behind private paywalls and is verified by experts. This archive is arguably where the value lies even should AI agents be used to analyse the data. However, there is a threat from general AI models that might become good enough for basic legal research. Relx needs to make sure its high-end tools are distinguishable from cheaper, more basic AI options.

Wolters Kluwer (Amsterdam: WKL) is similar to Relx and works in areas where large portions of digital revenue come from AI-powered tools. Its model uses experts to check the work to ensure that its medical and tax insights can be defended in court. The company's UpToDate platform is linked to improved patient outcomes in hospitals, which partly justifies its high prices. Even so, the firm has to spend a lot of money to stay ahead and it is investing heavily in product development to beat off new AI challengers. Profit margins are expected to hit 28% in 2026, but the long-term cost of staying ahead is something investors will have to watch.

SAP (Frankfurt: SAP) is in the middle of a massive project to move its vast global customer base over to the cloud. This is a slow and complicated process, but the numbers show that it is starting to pay off. The company's main push is a program called RISE with SAP. It is in an advantageous position because its systems serve as the operational backbone for major organisations. However, this is a double-edged sword as its customers are also in a better position to develop and implement cheaper customised systems.

Salesforce (NYSE: CRM) is a leader in its field, but is facing a problem in that its customers need fewer white-collar workers. The company's Agentforce product has grown very fast from a small base. But if AI agents allow one person to do the work of several, firms will need to pay for fewer licences from companies such as Salesforce. Its traditional way of making money from fees paid per licence is vulnerable to AI.

Adobe (Nasdaq: ADBE), owner of Photoshop, faces a direct threat. AI content-generation could make traditional licences less valuable. Professional designers still rely on Adobe, but casual users can now use AI tools for basic design tasks and, in time, the value of creative work could diminish as AI tools improve and companies reduce budgets. This creates a problem where the company must use AI to remain relevant while possibly hurting its own subscription numbers. The challenge for Adobe is to prove that it is worth the cost when simpler AI alternatives are ubiquitous.

The best software-as-a-service buys for UK investors

For UK investors, Sage and Experian look like some of the safest bets. Sage is built directly into the regulatory rules that British small businesses have to follow. This makes its software an essential service rather than just a tool you can choose to replace on a whim. As the firm moves toward automated accounting, it is more likely to grow its margins than lose its customers. Similarly, Experian has a massive data barrier that AI cannot easily copy. In a world where AI-generated fraud is becoming a bigger problem, verified data is incredibly important. This creates a safety net for banks.

Outside of the UK, Oracle is a strong way to invest in AI infrastructure without paying the extreme prices found elsewhere in tech. By controlling the database layer and putting billions into physical data centres, it remains a major part of corporate infrastructure across the world. Intuit also seems well-placed to handle this shift. Its AI features are already saving real money for its customers. Finally, Constellation Software continues to be expert at buying mission-critical niche businesses. It is exploiting market fears to buy up small businesses at a discount. It is using the panic to fuel its own growth.

AI is undoubtedly going to change how we work. We are entering a time where tasks that rely on a set process are being automated at a fast pace. However, the recent sell-off in the software sector has been blind. It has ignored the fundamental difference between a simple tool and something that is vital to the business. If you can separate the businesses that own and offer mission-critical services from those that merely sell a tool, you can find top-tier companies at prices that don't reflect their long-term value.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

It is an audacious bid. Through his hedge fund Pershing Square, Bill Ackman has offered $64 billion for Universal Music, one of the largest music conglomerates in the world and a producer for artists including Taylor Swift.

It is a complex deal involving both cash and shares and would move the company's listing from Amsterdam to New York.

It remains to be seen whether the deal is successful or not. The decision will probably rest with French billionaire Vincent Bolloré, who controls 18% of the company, and on its British chief executive Lucian Grainge, who is widely credited with managing the transition from analogue to digital music. Predictions markets are giving the bid a 37% chance of success by 30 June.

It is far from the only recent media megadeal. After a battle with Netflix, Paramount Skydance, which is controlled and financed by the Ellison family, has agreed to pay more than $100 billion for Warner Bros, the studio that controls a huge library of films, along with news channel CNN and sports broadcaster TNT. It still needs regulatory approval in the markets where it operates, but the deal is agreed, and there is little to stop it from happening now.

Investors are betting against AI slop

There is a common theme to both major bids. Huge sums of money are being wagered on the proposition that the arts will still be created and controlled by humans. That goes against the hype in the rest of the market.

We have read huge amounts about the rise of AI and the vast sums being poured into the software and data centres that will power super-smart chatbots. The leading companies in the sector, such as OpenAI and Anthropic, may well be worth more than $1 trillion if they list their shares later this year, while established giants such as Google, Meta and Elon Musk's X have been pouring fortunes into developing their own systems.

The creative industries are meant to be right in the firing line to be replaced by AI. The bots are good at generating music tracks that can be surprisingly popular. There have been plenty of AI-generated songs that have topped the streaming charts, and the likes of ChatGPT and Google Gemini offer music-generating tools. It is not hard to choose a genre, come up with a theme, and then upload a track onto Spotify or Google Music. It can be very lucrative.

Likewise, AI actors can replace real ones, and the same is true of scriptwriters, technicians and directors. Indeed, Netflix last month paid $600 million for InterPositive, an AI start-up developing post-production tools for the film industry, backed by the actor Ben Affleck. There are already reports of AI helping with scripts, and it may not be long before the bots are up on the big screen.

So why would anyone in their right mind want to pay tens of billions for a film studio or a music label? After all, there is not much value in a studio if films can be created by anyone with a laptop and a subscription to ChatGPT or Claude AI.

Conventional wisdom says the world will soon be flooded with AI slop – films of every conceivable genre, written for you, directed in any style you choose, and acted by AI-generated bots, or else by digitally recreated megastars from the past. Every taste will be catered to, and it may not be long before you can choose from a range of plot twists or endings depending on your personal taste. Traditional films will be finished.

Likewise, the streaming apps will also soon be flooded with AI slop – Taylor Swift knockoffs, along with tracks from every possible musical style, from classical to jazz to soul. We will all be able to create our own personal track-lists, made up of a mash-up of styles, singers and musicians precisely tailored to our own tastes or mood.

AI slop cannot create anything new

Well, perhaps. Yet the billionaire bidders for Warner and Universal are clearly on to something. In the end, human creativity will survive. The chatbots can recreate plots or tunes that already exist, study the libraries and rustle up a reasonable facsimile. But they can't create anything new; they don't have personality, they don't have any insight into our feelings, and they are never going to be able to make us laugh, cry or dance.

The chatbots might change the way industries function, but they are unlikely to destroy them. Investors are pouring huge sums of money into AI start-ups, confident that the systems will be able to replace just about any form of human endeavour.

Some of the world's richest people are betting the other way – against the triumph of AI slop. So should ordinary investors.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

Robotics “will soon be the largest market that we have ever seen”, says Mark Minevich, an AI strategist, and president and founding partner of Going Global Ventures.

One of the big limitations of artificial intelligence (AI) at the present time is that, in the words of an advertisement I spotted on the London Underground recently, ChatGPT can't mend a broken pipe.

Chatbots may not be able to physically fix things, but robotics is undergoing its own revolution, says Steve Brotman, the founder and managing partner of Alpha Partners. He predicts that “the use of robotics as the physical embodiment of AI will be a total gamechanger”.

By 2030, there will be a cumulative total of one million installed robots, predicts Junwei Hafner-Cai, a senior analyst in the Polar Capital Sustainable Thematic Equity team. By 2040 it'll be 100 million, and by 2050 one billion. Robots are “increasingly able to execute intricate tasks previously reserved for skilled human labour”, says Yan Taw Boon, a fund manager at Neuberger Berman. That paves the way for factories, logistics hubs and even service industries to be disrupted.

For robotics, AI is the biggest game-changer

The single biggest force driving advances in robotics is AI, says Anjali Bastianpillai, a senior client portfolio manager at Pictet Asset Management. “Physical AI” – by which is meant its integration with human-like robots and other machines – will be the third pillar of the AI revolution, says Bastianpillai, and will be as important as the huge amounts of money being used to build data centres and the efforts to use AI to power a new generation of intelligent software. Advances in “reinforcement learning” mean that robots can now improve through trial and error, allowing them to “adapt to new environments far more effectively than before”, says Darius McDermott, a managing director at FundCalibre.

These advances in AI are taking place alongside hardware improvements that enable robots to do things traditionally considered too complicated for them, such as walking, picking up a box on their own, or manipulating an item with their hands, says Minevich. We are quickly moving from a situation where robots were “fixed in place and programmed to do one simple task”, to autonomous machines that “adapt to their surroundings, make decisions on their own and are able to do more than one task”.

Rapid improvements in robot technology have been followed by a surge in interest from companies, which want to “protect margins and get a good return on investment”, while dealing with the pressures created by the collapse of global supply chains, says Minevich. Faced with the need to move production back to countries with “ageing populations and rising wages”, robotics is increasingly seen as a solution that can help companies maintain profits and productivity. This could also benefit society, as Richard Clode of The Bankers Investment Trust argues. If we don't “embrace” robotics, he says, “we will not have enough workers to produce the GDP growth and taxes to pay for an ageing population”.

Companies are already “much more willing to adopt robots than they used to be”, says Valentin Antoine of TDK Ventures. Some “holdouts” and sceptics remain, but the fact that early adopters are “seeing tangible returns on investment” is changing minds at the executive suite and boardroom level. Antoine likens the demand for robots today to that for computers a few years after the first affordable models started to hit the market. The levels of interest and rate of adoption is already much higher than it was even three years ago, he says.

Robots have already taken over factories

Factories have long employed robots in some form, of course, so it's little surprise that industry will be at the forefront of the revolution, not least because the economics are so compelling. Research suggests that, at wages of $20 per hour, it takes just six years for an investment in a humanoid manufacturing robot to pay off, says Hafner-Cai. Given the projected fall in the price of such robots, this payback period will fall to just 1.7 years by the end of the decade and to around three months by 2050, even if wages stay the same.

Many companies are already quietly piloting the use of humanoid industrial robots, says Brotman, and within five years companies that don't have them in their facilities will be at a competitive disadvantage. Some Chinese firms already use “dark factories”, so called because they don't need any lights, as there are no humans there. Chinese factories that aren't using robots themselves may well now be giving their factory workers lots of gadgets and cameras that will provide the training data for tomorrow's droids, says Sam Hields, a partner at venture-capital firm OpenOcean.

The idea of empty factories and human workers inadvertently training themselves out of a job may seem a little dystopian, but Hields emphasises that robots can also improve safety by taking over some of the most dangerous and dirty jobs. OpenOcean has recently invested in Sitegeist, for example, a start-up that has made a robot for hydro-demolition – using water at very high pressures to remove concrete. Human doing the work can only stand it for 20 minutes at a time. Robots can work for much longer, as well as map the progress of what is taking place.

Robots head out on the highway

Robots are also starting to play an increasing role in retail and logistics. These sectors are vital to our modern on-demand economy and create a lot of jobs “that can be very difficult for workers, due to the sheer tedium of checking and transporting thousands of items each day”, says David Pinn, CEO of real-world AI firm Brain Corp. The ability of robots to “understand the environment in which they are operating” means they can now start doing more work previously done by humans, including such tasks as scanning shelves to find products that are out of stock, or have missing price labels and products. Enthusiasm for stockroom and warehouse automation is spreading from cutting-edge retailers such as Walmart to other supermarkets and big stores. Robots powered by BrainCorp’s AI are now being deployed in larger facilities, often spanning multiple buildings, bringing greater efficiency to factories, distribution centres and warehouses.

Factories and warehouses are environments where everything, including the temperature, is closely controlled, of course. Places such as airports present more of a challenge, says David Keene, CEO of Aurrigo. However, even here the shortage of staff created by pandemic-era layoffs has forced airports to overcome the scepticism that you'd expect in such a conservative, highly regulated industry, and embrace the automation of tasks including baggage handling and the transfer of passengers to and from planes.

The biggest unstructured environment of them all is the open road, and there have been huge strides in autonomous driving in recent years. We're probably still at least a decade from seeing fully self-driving cars becoming the norm, says Keene, but it's impressive that many of the big names, such as Waymo, are confident enough to test their vehicles on London's complicated and often-chaotic roads. “Just like a robot Frank Sinatra, if self-driving cars can make it in London and Europe, they can make it anywhere,” he says.

Indeed, the technical challenges have largely been overcome, and regulators are the only major remaining roadblock, says Blake Heimann, a senior associate at WisdomTree. Even a year or two ago, there were very few people who had actually been driven in a Waymo or a Tesla robotaxi. Now, however, many visitors to Austin or San Francisco will have experienced driverless cars, whether that's a regular taxi or one ordered over an Uber. Indeed, China has already found that autonomous vehicles “have a lot fewer accidents and deployment of airbags than conventional cars”, says Bastianpillai.

The rise of robotic surgery

Autonomous vehicles aren't the only area where introducing robots could boost safety, says Bastianpillai. There is already substantial evidence that having surgeons use robots to carry out procedures can lead to better outcomes. Moving to a situation where surgeons sit at a console with two Xbox -type controllers, wearing 3D glasses, means that “a wider range of people can do more procedures a day for much longer”, says Andrew Williamson, a managing partner at Cambridge Innovation Capital (CIC).

This is important as only around a third of young surgeons are able to do the most advanced manual procedures, such as orthoscopic surgery. Even those who do manage to master the advanced techniques typically burn out by the age of 50 because “it's such a strain on the body to contort yourself into different angles to do all of the procedures”. In contrast, even though Williamson has no medical training, it took him just 30 minutes to learn how to use a surgical robot made by CMR Surgical (which CIC has invested in) to sew basic sutures on a training dummy.

Most current systems are set up so that the surgeon sits in the same operating theatre as the patient with the robot alongside them, says Williamson. But it should be relatively simple to move to a “hub-and-spoke model”, where you could have one expert surgeon sitting in Beijing, for example, using robots to carry out surgery in district hospitals out in rural areas. Mark Minevich thinks that predictions that everything will be done by surgical robots within two to three years are somewhat wild, but at some point soon routine procedures are likely to be done by robots under supervision.

Robots in the kitchen

Robotics is even spreading into the service sector, especially in countries such as Japan, says Miyako Urabe, a portfolio manager at the JPMorgan Japanese Investment Trust. You can now walk into a sushi restaurant, finish your meal, pay and walk out without talking to a single human being. You get your own seat assigned by a machine and order on a tablet, the food is delivered on a conveyor belt and finished plates are slipped into a hole next to your seat. Even the food is increasingly produced by robots that “can imitate the craft of the best chefs”.

Many Asian hotels also now make extensive use of robots, says Matteo Borghi, associate professor of entrepreneurship and innovation at Henley Business School. Guests arrive to be greeted by robots in the lobby that provide them with directions and help them check in. Robots are also an increasingly common sight behind the scenes, providing cleaning services and delivering amenities and food to people's rooms. Attempts to run hotels staffed solely by robots have floundered “because people still want the human touch” and European hotels have been more cautious “because they are worried about their reputation”. But the direction of travel is clear “and some hotels are now starting to partner with manufacturers”.

How long will it be before we can all get our own robot maid or butler? Hafner-Cai is relatively cautious, thinking that domestic work and caring will be among the last sectors to see the mass arrival of robots, coming after manufacturing, logistics and even medicine, “due to the safety concerns in interacting with elderly people and small children”. Customer acceptance may be another issue. Measurement technology company Hexagon suggests that, while 63% of adults globally are comfortable interacting with robots in industrial environments, only 46% are comfortable doing so in the home.

Still, it's significant that the key constraint is now “trust, safety and reliability rather than technical capability”, says Omar Moufti, a thematics and sectors product strategist at BlackRock. The Consumer Electronics Show in January showcased a lot of “consumer-focused robots”, notes WisdomTree's Heimann, and although the demonstration models on display still suffered “plenty of hiccups”, they are definitely improving. The first products are starting to hit markets. Unitree is planning to offer its humanoid G1 robot for $16,000, “potentially making it worth the time saved” for high earners who need a helping hand at home. Heimann believes domestic robots could hit the mainstream in as little as five to ten years. We look at the best investments to play the theme in the box below.

How to invest in the robotics revolution

The most direct way to play the robotics revolution is through an exchange-traded fund (ETF), such as the WisdomTree Physical AI, Humanoids and Drones Ucits ETF (LSE: PAIG). This tracks WisdomTree's own proprietary index, which covers what it considers to be the leading companies in four areas: humanoids; drones and autonomous mobility; next-generation factories and logistics; and emerging applications (such as healthcare). The fund is exposed to all parts of the supply chain, from the firms that build the robots, to those that supply key components. The two largest holdings are Ubtech Robotics and Rainbow Robotics, and the ETF has a total expense ratio of 0.45%.

Another option is the iShares Automation & Robotics Ucits ETF (LSE: RBOT), which tracks companies that make robots, alongside software companies and semiconductor firms. The largest holdings include Intel and Terradyne, and the total expense ratio is 0.4%.

Another holding in WisdomTree's ETF is the Korean car company Hyundai Motor Company (Seoul: 005380). Hyundai has ambitious plans to deploy humanoids in their factories over the next few years, says Blake Heimann, and owns robotics company Boston Dynamics. Even today, Hyundai already has “hundreds of welding robots, automated guided vehicles and even robot dogs doing some spot inspections” in its most advanced factories. Hyundai has seen its revenue grow by 80% between 2020 and 2025, but the stock still trades at only ten times 2027 earnings. The yield is 2.3%.

Fanuc (Tokyo: 6954) specialises in precision engineering, industrial robots and automation systems. Its main focus has been traditional static machines anchored to one spot, but it is moving into “co-bots” (robots that collaborate with human workers). It also helps companies develop “smart” factories. The stock trades at 30 times 2027 earnings; this is justified by the fact that its revenue has grown by more than 50% since 2025, with earnings per share doubling during this period. The firm also enjoys large operating margins of around 20% and a return on capital employed of just under 10%, allowing it to generate enough cash to pay a dividend yield of 2%.

A slightly riskier option is Aurrigo International (Aim: AURR). The firm focuses on autonomous vehicles in airports, used especially for baggage and cargo handling. The firm has also developed a software platform that enables people running airports to redesign their operations to take account of developments in automation. The company is currently losing money, but it has already more than doubled revenue between 2020 and 2024. CEO David Keene emphasises that the company is starting to win international recognition and is already working with Changi Airport in Singapore and Cincinnati Airport in the US, with additional interest from Canada and the Persian Gulf.

Richard Clode, co-manager of The Bankers Investment Trust, thinks that companies that design and sell robots won't be the only big winners from the robot revolution. He's very bullish on manufacturing firm Jabil (NYSE: JBL), due to its role in assembling robots and automation technologies. Jabil is currently working with US leading robotics firm Apptronik to help accelerate production of its humanoid robot, Apollo, as well as integrating Apollo into Jabil's own manufacturing processes. Despite seeing its profits more than quadruple between 2020 and 2025, Jabil stock trades at just 18.5 times 2027 earnings.

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Anybody who has watched the Dune films without having read the books may be confused by why an obviously high-tech space-faring future civilisation appears to have no computers. The in-universe explanation is simple: humanity had developed forms of artificial intelligence, but these machines and a small elite came to control the rest of humanity. All computers were eventually destroyed in a long, semi-religious revolt and the creation of all forms of “thinking machines” was banned from then on.

It is becoming hard not to imagine this when speculating about how AI will change the world. After all, if AI will soon do everything that its most excited proponents claim, the potential for huge job losses, the economic consequences of mass unemployment, and the broader lack of purpose and autonomy sound like exactly the kind of conditions to create mass unrest. That doesn't mean that a real-world equivalent of Dune's Butlerian Jihad would be successful in suppressing the use of AI – the Luddites did not manage to stop the industrial revolution – but the potential for social strife is there.

Yet if AI does not result in huge economic changes, it is questionable whether all the capital being pumped into the sector will pay off. There seems little doubt that AI research will be hugely significant in some areas, but that doesn't mean it will transform work more widely. We may end up with a lot more middle-management jobs supervising and fixing the output of AI tools. This could create its own problems – how do young workers gain skills and expertise if the basic work on which they learn is done by AI? – implying that long-term end-to-end productivity gains could be surprisingly scarce.

Hard assets take over from ‘capital-light’ stocks

At the moment, I have no firm view on which way this goes or whether we find a genuinely useful middle course. However, it is clear that investors are increasingly concerned that many knowledge-based activities are potentially at risk from AI. Hence they are rotating away from these stocks towards those with businesses that are rooted in the physical world. You can understand the logic: it is difficult, for example, to replace a railway with a large language model.

There are other trends supporting this. AI disruption is clearly driving attention in real assets, but it also sits alongside a wider set of pressures that includes defence and security, energy needs and healthcare demand, as the team at Ruffer Investment Company (LSE: RICA) points out. This is an environment in which it becomes attractive to own “constrained sources of supply” such as commodity equities, as a hedge against inflation and other shocks.

More broadly, a shift to firms with hard assets is very different to the consensus that has prevailed for well over a decade. Investors have come to see asset-light stocks with low capital expenditure as safer and more desirable. This remains purely speculation at this stage, but maybe a tense, volatile world with a focus on security means that old-fashioned heavy industries will be the darlings of the next cycle.

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Software stocks are selling off fast, as investors fear that their business models face an existential threat.

For years, artificial intelligence (AI) stocks have delivered impressive gains for equity investors, but the technology is now spooking the markets.

Recent weeks have seen several releases from AI frontier model developers like Anthropic that potentially enable entire applications for functions like legal analysis to be built fast and with minimal human input.

Apps like these were previously the domain of the wildly profitable software-as-a-service (SaaS) market. But investors are now concerned whether models like these can survive if businesses can simply throw a few prompts into Claude (Anthropic’s chatbot) and build their own alternative at minimal cost.

The selloff has been substantial. The Nasdaq 100, which is dominated by technology stocks, fell 3% between the start of the year and 23 February, during which time the S&P 500 has traded flat. SaaS stock Shopify (NASDAQ:SHOP) fell 27% during that period, in something of an AI-driven apocalypse for software stocks.

“The market environment today is presenting a wave of dislocation as AI developments ripple through industries,” said Alex Wright, portfolio manager of Fidelity Special Values Trust (LON:FSV).

But Wright adds that this widespread pessimism creates opportunities, especially for contrarian investors.

Some sectors and stock classes appear relatively insulated. US small caps are outperforming their larger counterparts this year, and there are reasons to believe that the macroeconomic setup in the US is favourable for them going forward.

Which other sectors and stocks could survive AI disruption? And has the selloff created buying opportunities for some oversold stocks?

The importance of value

Wright’s view is that the disruption being caused by AI fears makes this the most opportunistic time in the markets since the Covid-19 pandemic.

At that time, “many high-quality companies traded at deeply depressed valuations even as fundamentals began to stabilise”, he says.

Wright believes that, like the Covid disruption, the uncertainty around the winners and losers that AI will produce tilts the markets in favour of value investors.

Part of the reason that SaaS stocks have been so hard-hit by the AI disruption is that their hefty profit margins convinced investors, over the course of the last decade or so, that they could keep increasing their profits almost indefinitely.

That led to their fundamental valuations, such as price to earnings (P/E) ratios, becoming elevated. When that happens, any developments that challenge the perpetual growth thesis can lead to fairly rapid share price declines.

“Companies trading on rich multiples leave little margin for error,” said Wright. “When investors assume a company’s monopoly advantage will endure, even a modest shift in competitive dynamics, including the risk of AI-driven disruption, can justify a meaningful de-rating.”

It is notable that despite the recent selloff, many SaaS stocks are still quite expensive. Shopify still has a trailing P/E ratio above 80, making its stock far more expensive than Nvidia shares by that metric. ServiceNow’s (NYSE:NOW) trailing P/E is over 100.

The market clearly doesn’t believe (yet) that these SaaS stocks are going to disappear in the immediate future – merely that their margins may come under more pressure in the coming years than they have so far.

Over the longer term, the impact of AI on these stocks is harder to predict. But as Wright points out, the advantage of buying value stocks is that you don’t need to think that far ahead.

“The low valuation multiples we pay for stocks means we do not need to take a decisive view on the outlook beyond the next ten years,” he said.

Could Salesforce become an AI winner?

One of the SaaS stocks that best epitomises the AI disruption selloff is Salesforce (NYSE:CRM). Salesforce shares fell 32.7% in 2026 to 23 February and 42.1% over the preceding 12 months.

Markets fear that its CRM software is precisely the kind of product that AI tools could displace as the technology advances (it has also historically been viewed as one of the quintessential SaaS stocks, making it particularly susceptible to the latest round of pessimism).

But Dan Ives, head of global technology research at investment bank Wedbush Securities, believes that the Salesforce selloff is overblown.

Ahead of the company’s earnings release on 25 February – which is expected to see chair, CEO and co-founder Marc Benioff address the threat that many believe AI poses to Salesforce – Ives pointed out that its “potential to monetise its vast installed base of over 150,000 customers… is high.”

These customers, which include 90% of the Fortune 500, “have spent decades codifying their business logic and organising their data within the Salesforce ecosystem”, Ives added. This creates unique data and context that, Ives believes, generic AI models can’t replicate.

“We believe that [Salesforce] is still a long-term winner of the AI revolution despite the company finding itself in the epicentre of the software sell-off, as we think the market is overlooking key details about Salesforce's differentiated position against the negative AI Ghost trade overhang,” said Ives.

Benioff pivoted Salesforce towards becoming an AI business as early as 2014, and that it has integrated AI throughout elements of its offering, such as its Agentforce agentic AI product.

Contrarian stocks to beat the AI selloff

Picking SaaS winners is not for the faint-hearted in the current climate, especially given the fact that they still trade on high multiples (though Salesforce looks more reasonable than Shopify or ServiceNow at just 35 times trailing earnings).

Wright highlights some other sectors that have been hit by the AI disruption selloff, perhaps unfairly, and which now look very reasonably priced.

One sector he likes is staffing companies like Page Group (LON:PAGE), Hays (LON:HAS) and Sthree (LON:STEM).

“Investors have viewed staffers as vulnerable to disintermediation long before the emergence of AI,” said Wright. “More recently, concerns about automation and job displacement have intensified those fears. However, we have yet to see clear evidence that AI has structurally impaired these businesses.”

Similarly, wealth managers have been caught in a selloff that Wright views as “increasingly irrational”. The sector has “long endured disintermediation fears from robo-advice and lower-cost alternatives without having meaningful effects”, he points out. St James Place (LON:STJ) is an example pick, which currently trades below 14 times trailing earnings.

One of the major headlines when Tesla announced its Q4 results in January was the surprise announcement that it would wind down production of two of its flagship car products, in order to free up more resources to produce robots.

“We are going to take the Model S and X production space in our Fremont factory and convert that into an Optimus factory,” said Tesla’s CEO Elon Musk in a call with industry analysts following the earnings release. “That is slightly sad, but it is time to bring the S and X programs to an end and shift to an autonomous future.”

This underscored not only a strategic pivot that Tesla (NASDAQ:TSLA) has been envisaging for years, especially since the launch of its robotaxi in Austin, Texas last year, but the rapid emergence within the tech industry of what is increasingly being dubbed ‘physical artificial intelligence (AI)’.

Physical AI, in essence, is the incorporation of AI into physical objects. The clearest illustrative examples are things like self-driving cars or sophisticated robots, but there are numerous other examples such as drones and smart warehouses.

“Physical AI is not a single industry but a fast-emerging ecosystem where intelligence is being embedded into machines that operate in the real economy,” said Pierre Debru, head of research, Europe at asset manager WisdomTree.

Humanoid robots like Tesla’s Optimus, or the Walker S2 (an industrial humanoid robot that knows when its own battery is running out of charge and can replace it itself autonomously) from Chinese rival Ubtech Robotics (HK:9880), mark an eye-catching evolution from earlier forms of robot which, while undoubtedly valuable in factory automation, don’t quite step into the realms of science fiction.

Developments in physical AI

Self-driving cars are one of the most tangible aspects of physical AI, particularly for residents of cities like Austin or Los Angeles where they already roam the roads.

But self-driving cars could become a reality in the UK too by the end of the year. The Automated Vehicles Act means that automated vehicles will be legally permitted on UK roads this year.

Waymo, Alphabet’s (NASDAQ:GOOGL) self-driving car arm, is launching a pilot service in April.

Another much-vaunted example of physical AI in practice is the increasing efficacy of robotic surgeons.

Tools like Da Vinci, from Intuitive Surgical (NASDAQ:ISRG), enable surgeons to perform robot-assisted operations with greater precision, and potentially remotely. Advances in haptic technology mean that the latest generation of the Da Vinci robot can sense the amount of force being applied to tissue during surgery, effectively simulating a human surgeon’s sense of touch.

According to Intuitive Surgical, over 20 million people have now had surgery performed with the help of Da Vinci robots.

How to invest in physical AI

If you’re looking to invest in physical AI, it pays to consider the entire ecosystem as well as the specialist companies that have been mentioned in this article.

Nvidia’s (NASDAQ:NVDA) CEO Jensen Huang could be argued to have popularised the phrase ‘physical AI’ and Nvidia’s Cosmos is one of the leading platforms for physical AI, so it is a good place to start as a ‘picks and shovels’ play.

Similarly, the machine learning systems that enable physical AI to improve through experience are developed by some of big tech’s other major players. Alphabet’s Gemini, for example, is the large language model underpinning the next generation of Atlas robots from Boston Dynamics.

Alphabet is also a decent AI play given its ownership of self-driving car company Waymo.

You might want to invest in physical AI via an exchange-traded fund (ETF), as this will give you diversified exposure to companies in the industry.

On 19 February, WisdomTree launched the Physical AI, Humanoids and Drones UCITS ETF (LON:PAIG). It is Europe’s first ETF to focus specifically on physical AI. Top holdings include Ubtech, South Korean robotics firm Rainbow Robotics (KOSDAQ:277810) and Nvidia.

While PAIG is the first pure-play physical AI ETF in Europe, there are other pre-existing options with a similar if slightly broader focus. The ARK Artificial Intelligence & Robotics UCITS ETF (LON:ARCI) holds some non-physical AI companies but also has a significant exposure to physical AI and robotics companies like Tesla and Teradyne (NASDAQ:TER).

Global equity markets are increasingly fragile, dominated by the US, which in turn is heavily influenced by the AI boom. Many investors are therefore exposed to a single dominant theme. The vast sums being spent on building AI infrastructure support the US economy, driving the stock market and bolstering consumption through the wealth effect.

Global equities have become dominated by the US and by AI, leaving markets highly concentrated and expensive. Should this spending be questioned and ultimately reigned in – expected given uncertain returns on capital – the effect will be material.

Meanwhile, investors have sought to price the effects of AI on individual businesses. Broadly, hardware companies have been bid up as the clear beneficiaries (witness Nvidia), whereas many software firms have suffered owing to perceived risk of disruption.

AI is a transformative technology that will reshape economies, but we believe this effect will take years to develop, suggesting investors have overemphasised near-term effects. If enthusiasm for AI wanes and spending is curtailed, this “hardware good, software bad” dynamic may well reverse. In our view, this creates a great opportunity.

Beyond the AI boom: three low-risk stocks with long-term promise

Two companies that we consider fit the bill are ADP and Accenture. Automatic Data Processing (Nasdaq: ADP) is a high-quality, defensive compounder with a dominant position in global payroll and management software. It benefits from massive scale, deep regulatory expertise, and high switching costs, supporting recurring revenues and strong client retention. Structural tailwinds – outsourcing, workforce complexity, and cloud adoption – support steady mid-single-digit growth, making ADP attractive to long-term, low-risk investors. We think it may well benefit from AI being deployed, rather than suffering.

Accenture (NYSE: ACN) is a global leader in IT consulting and digital transformation. It benefits from long-term structural tailwinds, including cloud migration, data and AI adoption, cybersecurity, and initiatives to improve companies’ efficiency. A largely variable cost base supports margin flexibility through cycles, while strong free cash flow underpins consistent capital returns. Its execution track record and exposure to mission-critical spending make it a high-quality compounder over time. As AI becomes ubiquitous in the global economy, we expect it to bolster demand for Accenture’s services and improve margins.

A separate but attractive opportunity, unrelated to AI, is Novo Nordisk (Copenhagen: NOVO-B), a pioneer in anti-obesity medications. The stock has slid by 70% in 18 months, which we believe reflects overly pessimistic views on competitive and pricing pressures, rather than any permanent impairment of the franchise.

Novo remains the clear number two in a structurally attractive, underpenetrated global obesity market expected to burgeon over the next decade. Novo’s valuation has fallen to 13 times earnings at the lows – well below historical levels – despite exceptional returns on capital and strong cash generation.

New leadership, strategic pricing moves to expand access (notably with oral GLP-1s), and a credible next-generation pipeline led by CagriSema all bode well. Sentiment and expectations have overshot fundamentals, creating an attractive entry point with asymmetric upside as growth normalises from 2027 onwards.

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Andrew Van Sickle: A recurrent theme this year, and the subject of one of your key research papers, was drawing parallels between the dotcom bubble and this AI boom. What’s your take? Is this a case of rational exuberance?

Rob Arnott: It is a case of rational exuberance, with somewhat irrational pricing. To be clear, AI is the real deal. There is no ambiguity about that. It will change our world in more ways than we can imagine.

It was the same story in 2000. The internet was going to change everything: how we buy and sell goods and services; how we communicate with family and friends – or clients; how we get our news; how we do our research. And all of that happened. It’s just that the internet wasn’t embraced as rapidly as its cheerleaders expected, and I think the same will be true with AI.

A vital issue the narrative in 2000 missed was that the biggest stocks at that stage weren’t necessarily going to be the leaders in 2010, let alone 2020. I recall Cisco Systems’s chairman in 2000, John Chambers, saying he didn’t see why Cisco couldn’t grow sales by an annual 40% for years to come. At that pace you grow sixfold in five years. In fact, it grew sixfold in 25 years. Still impressive, but not 40%. As a result, investors holding Cisco since March 2000 are slightly in the red.

Of the top-ten companies by market capitalisation in 2000, only Microsoft remains on the list today. The other nine have all been displaced. Intel and Nokia were on the list, for instance. Other firms became better at producing chips and phones. People talk about companies having moats (competitive advantages that stop rivals from encroaching on their territory), but moats don’t last forever.

AI is already displacing current market leaders

There has already been some of this sort of displacement with AI. Google’s core business model is making money from sponsored links and pop-up advertisements. People discovered that ChatGPT or Perplexity can be used as a search engine, and you don’t get annoying pop-ups and sponsored websites; no need to scroll through a dozen sponsored websites to get to something useful. Moreover, OpenAI itself was disrupted a year ago by DeepSeek.

So this is a rational bubble in that AI is very real. All the market leaders have a shot at being dominant players for years. But I also recognise that some of them will be displaced.

Andrew Van Sickle: Could you give an example from your experience that makes you think AI is the real deal, as you say?

Rob Arnott: The latest iteration of ChatGPT is extremely impressive. When we write a research paper, we hand it over to AI and ask it to write a summary and critique it. We also get it to tell us if we’ve missed any references or citations that we ought to have considered.

We ran a paper we recently finished through ChatGPT and got an elegant synopsis that was better than anything the authors could have come up with. We also got a thorough evaluation of what was good about the paper and what wasn’t so good, along with a list of citations we’d missed. Four of them made us think: “Oh, my goodness, we should have thought of that one.” Four were borderline, and two didn’t exist.

The upshot is that AI can’t think like a person, but it’s excellent at scouring data and comparing it with information it has already absorbed. It can sift data sets of billions and billions of data points and then it will start to appear close to being human. If there are fewer data points, though, it will struggle badly.

For example, when it comes to researching long-term stock market behaviour there are only thousands or millions of data points, depending what we’re looking at, so AI can’t come close to the efficacy of human judgement supplemented by ordinary statistical tools. It can’t predict things like whether there will be a market downturn or recession. In short, AI is a quantity, not a quality game.

Andrew Van Sickle: Given the recent emphasis on technology growth stocks, where do you, as a value guru, see bargains?

Rob Arnott: The spread between growth and value is wide everywhere; globally speaking, it is near record territory. In the US, it is close to the level seen at the peak of the dotcom boom and the summer of 2020.

I would say don’t abandon growth, but don’t overweight it. Betting against a bubble is dangerous because bubbles can last longer and go further than you can imagine. So to the extent you have value in your portfolio, put more money into that.

We at Research Affiliates are always keen to find value and reduce concentration risk. We came up with the Research Affiliates Fundamental index (RAFI) series in 2005. These indexes are skewed towards value. The companies are weighted by their size and hence their economic importance – using measures such as sales, cash flow, book value and dividends – rather than share price. This approach has done much better than market-capitalisation-weighted value indexes, proving superior in three out of four years.

So investors might like to research the RAFI-based exchange-traded funds (ETFs) from Invesco that focus on value. There is the FTSE RAFI All World 3000 Ucits ETF (LSE: PSRW) for a global play; the FTSE RAFI US 1000 Ucits ETF (LSE: PRUS) for US value; and its European counterpart the FTSE RAFI Europe Ucits ETF (LSE: PSRE). The FTSE RAFI UK 100 Ucits ETF (LSE: PSRU) is a British version.

Andrew Van Sickle: Let’s move on to gold. It appears to be pausing for breath. Is the medium-term outlook still bullish, do you think?

Rob Arnott: The biggest factor that’s bullish for gold is the developed world’s addiction to debt-financed government spending. The fear is that fiat currencies will create their own financial crisis that could be bigger than the global financial crisis of 2009; I think that’s reasonably likely.

I don’t see it as an imminent threat. But just as Greece had to face the music at some point when its debt started to soar towards 200% of GDP, the US isn’t immune to that dynamic. We may be the biggest economy in the world, but that doesn’t mean we can endlessly spend money we don’t have. A crisis could arrive in ten to 15 years’ time.

It would require a severe bout of inflation to reduce the real value of the debt, and the consequence would be that the gold bugs of today would not regret their purchases even at today’s prices. That said, I am not a gold bull for 2026, given the recent surge to new records and the froth in the market.

Andrew Van Sickle: What could the result be of Donald Trump’s apparent desire to influence the level of interest rates set by the US Federal Reserve?

Rob Arnott: The upshot may be that he will keep rates 1% or 2% below where they ought to be, resulting in free money, which I define as rates below inflation: negative real rates. We had a dozen years of free money in the US, which was a key reason for slow growth.

The trouble is that stimulus doesn’t stimulate. My colleague Chris Brightman has written a great deal on stimulus failing to generate sustainable, healthy growth; you can find some of the papers on our website. Monetary stimulus leads to asset bubbles, exacerbating wealth inequality. It pushes money into the hands of people who are already well off, and they spend it, boosting corporate profits and stimulating the stock market further.

Part of the overall stimulus in recent years has been fiscal, too. That involves the government either taxing or borrowing money out of the private sector and then spending it, so it can hardly stimulate private enterprise.

Andrew Van Sickle: What is the outlook for US inflation? Will the tariffs boost it?

Rob Arnott: What could make inflation jump again is massive overspending, which we’re still doing, so that is a dangerous game. I wouldn’t view tariffs as particularly inflationary, however. I remember many analysts panicking early last year about a deep recession and hyperinflation.

But think it through. If the tariff rate settles at an average of 15%, it’s no different from a 15% VAT levy – applied in a limited way, solely to imports. That’s hardly catastrophically inflationary. It’s a tax. It boosts costs on taxed items. But if our imports in the US are worth 11% of GDP, and if we have an average tax of 15%, then it’s going to raise 1.6% of GDP in tax revenues. And that’s exactly what happened.

So who pays it? The suppliers swallow part of it to remain competitive in the US market; the supply chain takes some of the strain. The consumer has to pay the rest, perhaps half, or 0.8% of GDP – as a one-off. As a libertarian, I think the correct tariff rate is 0%. But the tariffs aren’t going to send inflation rocketing.

Trump’s tariffs games are essentially him implementing a strategy from Sun Tzu’s The Art of War: scare your adversaries and you can win without firing a shot. So, he threatens 100% tariffs and opts for far less. He’s lived by that book for his entire life.

Andrew Van Sickle: Last time we talked, you said you thought China had taken a statist turn under Xi Jinping. He has recently said he wants to make bolstering the private sector more of a priority. Has the regime realised that it will need to be more free-market to get China out of this debt deflation?

Rob Arnott: The trouble is that Xi Jinping is an unreconstructed Maoist, and so paying lip service to the private sector is about as far as he is likely to go. I still think China will get old before it gets rich.

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The future of Greenland has dominated the headlines in recent weeks, but increasingly, the real action, both commercially and militarily, is taking place in space, hundreds, even hundreds of thousands of miles above the Earth. “Over the decades that I’ve been working in the industry we’ve shifted from focusing on getting rockets and satellites into space, to trying to find ways to use them once they are there,” says Jeff Thornburg, CEO of Portal Space Systems. Companies in the space sector now find themselves in the midst of a gold rush, with everyone from defence agencies to some of the largest private firms in the world beating at their door. The sector is on track to surpass $1trillion in value by 2032, according to Susana Cruz Ramirez, a research analyst at Panmure Liberum.

What's behind the recent commercial space boom?

The main reason for the boom in the private space industry is that it is now easier to get into space due to the rise of private firms that make frequent flights using reusable technology and at lower cost, says Heather Pringle, former commander of the US Air Force Research Laboratory, and current CEO of Space Foundation. “No fewer than three major companies – SpaceX, Blue Origin and Rocket Lab – have established their own capabilities to launch, deliver payloads, have their launch vehicles re-enter Earth’s atmosphere, be recovered and be reused to launch again.”

The existence of reusable rockets in particular has been a “game changer” for the industry in terms of cost savings, says Pringle. “What the US space shuttle used to carry for $30,000 per pound in weight (or more) can now be put into low Earth orbit for $3,000 a pound (if not less).” The development of cheap, reusable rockets has also had a “dramatic impact” in terms of launch speed and frequency. In 2024, a rocket was launched somewhere in the world every 34 hours. That rate was up to every 27 hours in 2025. These trends show no signs of slowing down, says Pringle. Indeed, they will accelerate in the years ahead.

Another factor in the plummeting costs of transportation is that satellites have been slimming down. “Just as Apple and Samsung have been able to create iPads, iPhones and other smart devices, companies have worked out how to make miniature satellites that are just as powerful as traditional satellites, but weigh much less,” says Paul Thomas, global space technology lead at Accenture. All this has put the cost of launching a satellite into space within the reach of a far larger number of companies.

The rise of AI and machine learning is also providing a major boost to the sector, says Thomas. Both developments have made satellites increasingly autonomous, reducing the need for human intervention in their operation. The most advanced satellites are “able to filter out noise to detect anomalies, and automatically to adjust their behaviour”. The AI revolution has also led to a huge increase in the amount of data that firms, institutions and individuals require. All these trends are leading to “a rapid commercialisation of space”.

Defence in space

Although there has been a major shift from the government to the private sector when it comes to the provision of space services, the government still has an important role as a consumer, especially when it comes to defence. When Skyrora, a launch vehicle manufacturer and operator based in Scotland, started in 2017, “we were just focused on doing work for the civilian side of the industry”, says its director of government affairs, Alan Thompson. Over the past decade, however, it’s become increasingly clear that “the military has an increasing interest in deploying assets in space”.

But because the military and defence sector is coming to the party relatively late, it just doesn’t have the time or ability to catch up. It will, then, probably partner with specialist space companies, either by outsourcing or through joint ventures. Skyrora and a number of other firms like it will then “see an increasing defence angle to what we are doing over the next few years”, says Thompson. Demand won’t solely be coming from the US, either. Governments around the world, he says, are seeking to become less dependent on American firms and launch sites. Europe in particular will be looking to beef up its independent space capabilities, says Ramirez.

That geopolitical tensions could spread into space is a depressing prospect, but the drop in the cost of launches has also encouraged a greater range of governments to get involved in space with more commercial motives. There are “more and more space agencies emerging around the world”, says Dylan Taylor, CEO of Voyager Space Holdings. Even two decades ago there were probably only about 15-20 space agencies in the world; now there are around 75. At the same time, existing space agencies have seen their budgets increase.

That spending can be controversial when there are plenty of problems on Earth. And of those 75 space agencies, probably around half have never had their own astronaut, admits Taylor. Yet most of them “are keen to mint one”, as having your own person in space can be a good investment more broadly. The acclaim won for getting someone into space “can be an important motivating tool” in terms of encouraging youngsters to take up of the study of science, technology, engineering and maths in their home country, for example.

Why is the military interested in space?

One reason the military is becoming so interested in space is because so much commercial activity on Earth depends on what’s going on in space. A report by London Economics in 2023 estimated that losing the Global Navigation Satellite System (GNSS), which powers GPS and other navigational aides, for just seven days, would cost the UK economy alone £7.6billion.

Another key commercial application is in communications. It’s still not possible for ground-based systems to deliver completely comprehensive broadband services in remote places, as Nat Edington of Filtronic points out. However, a satellite-based system would be able to do so. Expect terrestrial networks to set up in space over time. In the short run, this will be in the form of a hybrid system, where the terrestrial networks will be operating alongside low-Earth orbit (LEO) space networks. But “as we come to the end of this decade, most broadband connectivity will end up” being delivered from space.

The explosion in the number of satellites in space, as well as the fact that Earth-space communication “has moved from the realm of governments to the mass market”, means that an “incredible amount” of data about what’s happening on Earth is now being created and used by companies, says Mark Boggett of Seraphim Space. This is set to transform agriculture – “you can now use data from space to identify the performance of crops and determine whether they are infected with pests, or need more nutrition”.

It’s not just farmers who will benefit from this. “This imaging and data revolution” will affect almost every industry you can think of, from oil and gas to logistics and real estate, says Boggett. Satellite View, for example, one of the companies Seraphim has invested in, “has one of the world’s most advanced infrared cameras, which enables it to look down from space and determine whether there are people in individual buildings, as well as the overall insulation level of the building and its contribution to global warming”.

Space is the final economic frontier

There is also increasing interest in moving at least some economic activity out into space itself. To date, the space industry has been driven forward in three waves, says Ramirez: “the institutional interest in the space race in the 1950s and 1960s, the development of broadcasting satellites in the 1970s and 1980s, and the creation of low-cost launches and transportation by Elon Musk” in the present day. The fourth wave will be to build an economy in space. The rapidly decreasing cost of transporting material in space will make it “increasingly viable to relocate some of the more polluting sectors upwards”, she says. Two activities Ramirez puts at the top of the list for relocation are the data centres that power the AI revolution and the mining industry

Moving data centres to space will be a relatively straightforward problem to solve. We already know how to get all the infrastructure up there, and the low temperatures will provide a free source of cooling, says Jon Lusczakoski, a partner at AE Industrial Partners. Asteroid mining, however, will be more tricky. “We’ve proved that we can reach asteroids, but bringing the material back to Earth at a commercially viable rate will be a bit more of a challenge.”

But even if asteroid mining isn’t going to happen immediately, there are certainly ongoing discussions about mining the moon. Indeed, one of AE Industrial’s portfolio companies, Firefly Aerospace, the first commercial company to successfully land on the moon, “has been approached by companies that want to move mining assets to the moon”, says Lusczakoski. “It’s got to be the right assets to make it economical, but people are definitely trying to make the numbers work.”

SpaceX launches onto the stock market

The space industry clearly has a promising future, but one massive near-term catalyst that could change things in the next few months is the rumoured initial public offering (IPO) of Elon Musk’s SpaceX sometime this year. Musk himself appeared publicly to confirm that this would happen, around six weeks ago, when he called the reports “accurate”. Like many in the industry, Nick Flitterman of Portland Advisers admits to having mixed feelings about the controversial entrepreneur. There is, in his view, as well as those of others, a “major concern” over “having lots of money and power concentrated in one person’s hands”.

However, even this could work in the industry’s favour. If governments and companies decide that they don’t want to become solely reliant on Starlink and SpaceX, that in itself will “create new opportunities”. Musk has in any case played a big role in “getting people talking” about the sector over the past two decades; the IPO could be a “major catalyst” for the industry, especially in terms of raising the profile of the entire sector. This could be a good thing, says Flitterman, “as the higher the profile of space, the more money will flow into it”.

Jeff Thornburg of Portal Space Systems agrees that a SpaceX IPO, which could see Musk’s company valued at more than $1trillion, could serve as a “major inflection point”. It could prove to be a much bigger version of the 1995 Netscape IPO, which in retrospect is widely seen as marking the start of the dotcom era. Apart from anything else, a SpaceX IPO will serve as validation for those early stage investors who have put money into the industry and “have been waiting for a major flotation for a long time to demonstrate that their investment was justified”.

It’s not just venture capitalists who will cheer a strong SpaceX IPO. Over the past few years, Musk’s company has produced a stream of alumni, including Thornburg, who worked at SpaceX, who went on to set up their own space companies. Combined with the huge amount of wealth generated from the IPO, this should help create “the next generation of tech companies, start-up founders and investors”. Thornburg thinks it’s an “exciting” time to be working, or investing, in the sector.

Track the space boom with an ETF

Probably the easiest way to invest in the space sector is through an exchange-traded fund (ETF), such as the VanEck Space Innovators UCITS ETF (LSE: JEDG). This tracks the MVIS Global Space Industry index, which focuses on the largest and most liquid listed companies in the sector. The ETF has 25 holdings, with launch services company Rocket Lab Corp and satellite imaging company Planet Labs being the two largest. Overall, the holdings have a trailing price/earnings (p/e) ratio of 25, and the fund has a total expense ratio, a measure of the total costs associated with managing and operating a fund, of 0.55% – that is reasonable for such a specialised ETF.

The acknowledged leader in the venture-capital sector is Seraphim VC. Seraphim has launched various funds, but the Seraphim Space Investment Trust (LSE: SSIT) is the easiest for ordinary investors to access. It has a huge portfolio of unlisted companies that provide a lot of innovative services. The largest of these is miniature satellite provider ICEYE, which may be floated very soon. Another interesting company in the fund’s holdings is D-Orbit, which provides a “space-taxi” service – that is, rockets that travel inside a larger SpaceX rocket and cover the last part of the journey. It is one of the leading companies pioneering the idea of having data centres in space. The trust’s price has shot up in recent weeks and now trades at a premium of around 24% to its net asset value.

Four promising listed companies for investing in space

One of the few listed companies in Seraphim’s portfolio is AST SpaceMobile (Nasdaq: AST). AST SpaceMobile competes with Starlink by providing mobile-phone services from its “cell towers in the sky”, which includes the largest satellite that has ever been launched into space and has the power of 30 land-based towers. The company hasn’t yet turned a profit, but it has already established relationships with major mobile network operators, such as Vodafone, Verizon and AT&T. These deals involve the operators using AST to fill in the gaps in their terrestrial network coverage and should allow them to expand into other markets without deploying physical assets.

Another company that is no longer part of Seraphim’s portfolio, but which Seraphim was an early investor in before it went public in 2025, is Voyager Technologies (NYSE: VOYG). Voyager is split between two divisions: a military division that helps run Golden Dome, the US missile defence shield; and the space solutions division, which is the largest commercial manager on the International Space Station, and currently involved in a joint venture to build the replacement to the International Space Station. Like AST, Voyager Technologies isn’t actually making any money at the moment, but it hopes to start making profits by 2027.

One London-listed company that is worth considering is Filtronic (Aim: FTC). It was originally spun out of the University of Leeds back in 1977 and it provides technology that amplifies signals, making it easier for people on the ground to communicate with satellites in space and vice versa. As a result, the company has been a big winner from the rapid increase in the number of satellites deployed in space. Already its revenue has tripled between 2021 and 2025, with earnings per share rising more than tenfold since 2022, which justifies the fact that the shares are valued at 52 times 2027 earnings.

One European satellite company that Ramirez likes is SES (Paris: SESG). Having merged with rival Intelsat last year, SES now has one of the largest communication satellite fleets in the world. Ramirez particularly likes the fact that SES is now focusing on acquiring custom from governments. Internet uptake from satellites is expected to “accelerate across government, maritime, and aviation segments, driven by national security priorities and the need for remote connectivity”. Most listed companies in the space industry are either losing money or trading at sky-high valuations, but SES trades at a relatively modest 20.5 times 2026 earnings.

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Emerging markets came into focus over the course of 2025 amid a volatile global backdrop. Heightened geopolitical tensions and uncertainty over US trade policy caused periodic bouts of weakness, as investors assessed the potential impact of tariffs on global trade and growth.

However, these concerns also contributed to a weakening of the US dollar, a dynamic that has tended to be supportive for emerging markets by easing financial pressures and allowing for more flexible policy. This trend was reinforced as some investors began to reassess the risks of over-concentration in US assets and diversified more actively into other markets.

In this environment, opportunities across emerging markets have remained uneven and recovery has played out differently by country and sector, with stronger momentum in parts of Europe, in technology-linked markets in Asia, and a more cautious – but improving – outlook in China. Against this backdrop, active stock selection is critical. The following three stocks reflect our approach to investment.

Focus on technology to profit from emerging markets

National Bank of Greece (Athens: NBG) reflects the ongoing repair of parts of Europe’s financial system. Greece has emerged as one of the clearer recovery stories, supported by improving macroeconomic fundamentals, resilient private consumption and a sustained reduction in public debt, culminating in a return to investment-grade status.

NBG has completed a long period of restructuring and now benefits from a large deposit base and strong capital ratios. The resumption of dividend payments after a 16-year hiatus reflects the strengthening of its balance sheet and operating position, as well as a more stable domestic backdrop.

Within the technology sector, Taiwan Semiconductor Manufacturing Company (Taipei: 2330) provides direct exposure to sustained investment in AI and cloud computing. Increased capital spending by global technology firms has driven demand for advanced semiconductors, where manufacturing capability and scale are critical. As the world’s leading producer of advanced chips, TSMC is a leading beneficiary of this demand. Its technology underpins applications ranging from AI to cloud infrastructure, and its position within global supply chains reinforces Taiwan’s importance as a semiconductor hub. This combination leaves TSMC well placed to benefit as investment in advanced computing capacity continues.

Tencent (Hong Kong: 700) operates one of China’s largest internet platforms, spanning online gaming, digital advertising and cloud services. Earnings growth has been driven by unexpectedly high revenues from gaming, AI-enabled improvements in advertising, and a recovery in the cloud business. The company has also sharpened its focus on capital discipline, reflected in an increased emphasis on dividends and returns for shareholders.

This progress comes despite a more mixed market backdrop in China. Targeted policy measures have recently helped stabilise sentiment, while innovation remains a defining feature of the technology sector. Developments such as the launch of the DeepSeek AI platform underline China’s continued role in AI, supporting longer-term demand for cloud, software and digital services – areas where Tencent remains well positioned.

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Shares in Taiwan Semiconductor Manufacturing Company (NYSE:TSM), often referred to as TSMC, opened 4.8% higher on 15 January following an earnings beat and uncharacteristically bullish outlook for the artificial intelligence (AI) sector.

TSMC’s earnings rose 35% year-on-year to $3.14 per share, beating analysts’ expectations of $2.53.

Revenue rose 25.5% to $33.7 billion, ahead of estimates of $32.9 billion.

As impressive as these numbers are, it was TSMC’s forward guidance that grabbed markets’ attention.

“Management sees AI demand growing at an eye-popping 55–59% annually through 2029, and cloud giants are already knocking on its door to offer any help they can to secure future capacity,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown. “That confidence is backed by action – TSMC is pulling forward fab build-outs in Taiwan and the US, accelerating its Arizona expansion, and buying extra land for advanced packaging.”

TSMC’s core position at the heart of the AI ecosystem means that strong demand for its products is a good indicator of general demand for AI.

The company’s management has a reputation for being cautious with forward guidance. “This aggressive build-out suggests they see a durable runway for AI demand stretching well into the next decade,” said Britzman.

As such, the forward guidance is a strong indicator against the argument that the AI stocks are in a bubble that is set to burst.

The Nasdaq 100, which is dominated by tech and AI stocks, opened 1.2% higher on 15 January, though broader US stocks were subdued; the S&P 500, though, opened 0.4% lower.

What does TSMC do?

Taiwan Semiconductor is a semiconductor “fab” (short for “fabrication”) company. In other words, it makes the chips that companies like Nvidia and AMD design.

Making computer chips, especially the cutting edge ones that are used for AI, is very technologically advanced. TSMC is one of only a handful of companies that can make chips using the most advanced 2nm process. It is widely regarded as the best manufacturer of AI chips in the world.

This gives it something approaching a monopoly over the manufacture of AI chips. Most of the industry’s main players are competing hard against each other to build the best products; they cannot afford to scrimp when it comes to the building blocks.

So while it has historically been one of the unsung heroes, TSMC is quietly powering the AI revolution. Some experts have therefore called it the most important company in the world.

"These results aren’t just good for TSMC - they’re a roadmap for where the next leg of AI investment is headed," said Britzman.

Last year was a horrible year for the active fund-management industry. Investors have consistently been pulling money from active investment funds over the past decade, but outflows accelerated in 2025. According to data compiled by Bloomberg Intelligence, more than $1trillion flowed out of US active mutual funds last year, up from around $600billion in 2024. Investors moved into passive exchange-traded funds (ETFs), adding more than $600billion last year. The trend is much the same in the UK, albeit with smaller numbers.

This might appear to suggest the end is nigh for the UK’s listed fund-management sector, but that’s not entirely the case. Figures available indicate that only two of the listed managers are on track to report a decline in assets under management (AUM), according to analysis from Peel Hunt. Those managers are Liontrust and Impax Asset Management, which lost two key mandates from St James’s Place. That will drag group AUM down by as much as 23.3% for the year.

Polar Capital (Aim: POLR) is the standout performer. At the end of September, group AUM sat at a record £26.7billion, up from £23.2billion at the end of June. Net outflows for the quarter totalled just £58million, compared with £632million in the prior quarter. The company’s success can be attributed to its position as a specialist manager that’s focused on a handful of key sector mandates. At the end of September, the firm’s open-ended funds accounted for 75% of assets, with investment trusts making up 23% and segregated mandates the remainder. Tech and healthcare strategies accounted for 51% and 14% of AUM, respectively. This does mean the firm is overexposed to these sectors as a manager, but over the past decade, it’s been on the right side of the fence.

Polar Capital's deep roots in technology

It’s hard to argue that technology and healthcare won’t continue to attract investors’ interest over the next decade. These sectors might encounter some turbulence along the way, but tech and healthcare will remain two of the most exciting and promising thematic trends. Under the new CEO’s stewardship, Polar plans to double down on the markets that have helped it become one of the UK’s top boutique fund managers.

The group’s roots are in technology. It was created by Brian Ashford-Russell and Tim Woolley, who left their positions at the Henderson Technology Trust, managed by Henderson Investors, to set up the new boutique in 2001. Backed by Caledonia Investments, the self-managed investment trust Polar grew quickly despite the dotcom bubble, reaching $2billion in AUM by 2005. Henderson Technology Trust, launched in 1996, became the Polar Capital Technology Trust, a core of the group’s fund range. Since launch, the tech trust has returned 14.7% per annum (to 30 April 2025) by correctly timing key turning points in the tech world, such as the rise of Big Data in 2010 and AI as early as 2017.

The firm’s flagship open-ended tech fund, the Global Technology Fund, was launched at Polar’s inception. Today, it’s far bigger than the trust, although they’re both managed by the same team. The key difference is concentration. The trust has 91 positions, compared with 65 for the open-ended vehicle. But the trust is more concentrated, with 53% of the portfolio in the top-ten holdings, compared with 47% for the open-ended fund.

Iain Evans is a promising new boss

In September, Iain Evans was appointed CEO after 21 years with the company. Evans is planning on doubling down on what’s worked for Polar – specialism in a few key sectors with select acquisitions. This desire to focus on what works is refreshing in a sector that often appears to be struggling for direction. Many managers have panicked at the rise of passive funds, often wasting money on bolt-on acquisitions in the hopes of achieving growth or expanding into new markets.

Polar is doing the opposite. While that may leave the company at the mercy of the performance of technology, it stands out in a struggling sector. However, the market is not taking its edge into account. Instead, investors are lumping Polar in with struggling managers such as Liontrust and Impax as its valuation sits near the bottom of the range for its fund-management peers.

At the time of writing, shares in Polar Capital are trading at a forward price-to-earnings ratio (p/e) of ten, according to Panmure Liberum, and nine according to Peel Hunt. That’s a deep discount to the fund-manager sector average of 16 (including wealth managers). Fund-managers’ earnings are cyclical compared with the more stable earnings from wealth management, so the shares deserve a discount to the sector average, but a gap of more than 43% seems excessive. Panmure Liberum believes 20% would be more appropriate.

There’s also the company’s dividend. Polar earns its money in both regular fund-management and performance fees. On its asset base of £23.2billion, Polar Capital booked management fees of £86.8million in the first six months of fiscal 2025. For the year ended March 2025, it booked a management fee yield of 78 basis points (0.78%), generating net management fees of £178.3million. It also earned performance fees of £16million for the year, up several million compared with 2024. These could hit £28 million in 2026, Panmure estimates. Although regular management fees already cover Polar’s dividend, the additional performance fees mean the company’s 8.7% yield is more than covered by earnings per share, and should remain so for the foreseeable future.

All in all, Polar offers a cheap, leveraged way to play the global demand for tech stocks, with a market-beating dividend yield on offer as well.

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Coastguards, fishing ministries and port authorities need to track the movements of large numbers of vessels. SRT Marine Systems (Aim: SRT), founded in 1987, is a leader in providing the technology they need in order to do that. Customers range from sovereign agencies to individual vessel operators, including the RNLI lifeboat service.

SRT’s technology and systems enable its customers to solve important problems, such as establishing where borders and territorial sovereignty lie and detecting illegal fishing, smuggling and piracy. To that end, its maritime surveillance and monitoring systems are used by coastguards and border agencies, national fisheries authorities, and ports and waterways authorities. SRT’s digital AtoN systems (aids to navigation) communicate directly with vessels’ electronic charts and supplement static buoys and lighthouses.

The technologies involved include the automatic identification system for ships (AIS, which automatically transmits a vessel’s position, identification, course and speed) and transceiver systems. In one case study an AIS AtoN installation was used to protect a large wind farm by automatically marking its perimeter on ships’ electronic charts. In another, SRT supplied a low-cost vessel identifier to enable its partner to provide the authorities with a system to monitor its fishing fleet.

The global market for such maritime surveillance technology was worth $23 billion-$26 billion in 2025 and is expected to double by 2034. The navigation-safety market is estimated at $14 billion in 2025, growing to $24 billion by 2035.

SRT Marine Systems signs a $213 million contract with Kuwait

In October 2024, SRT signed a $213 million contract with Kuwait for a maritime surveillance system. Implementing that contract will take two years, followed by 10 years of support, training and maintenance. That’s a major contract for a company whose 2024-2025 turnover was £78 million.

And last January SRT was given the go-ahead for the second phase of a long-term project to build a national integrated maritime marine domain awareness (MDA) coastguard system. That is worth $15 million and should be completed by the end of 2025, followed by a five-year support phase. The third phase of the contract should start in 2026.

SRT now has five such long-term partnerships with sovereign states where the initial set of contracts (excluding follow-on contract phases) are valued at £325 million. These projects include five key elements: infrastructure; MDA system technology; training and organisation; data services and ongoing support. Data services include the delivery of supplementary data such as satellite surveillance scans and processed AI data.

There is increased interest in MDA technologies with regard to the security of borders and territories, so there are plenty more potential customers. SRT had a validated sales pipeline of £1.8 billion as of October 2025. The exact dates when these opportunities are likely to turn into contracts varies, but SRT’s chairman, Kevin Finn, says the company now has “good visibility” on about £500 million of the £1.8 billion. That £500 million includes an award letter for $200 million from a new sovereign customer that SRT received after its 2024-2025 year-end.

SRT Marine Systems revenue

SRT’s revenue has risen more than five times – from £14.8 million in the 15 months to the end of June 2024 to £78 million for the 12 months to the end of June 2025. This took the company into profit, with an operating profit figure of £6.4 million compared with an operating loss of £13.2 million for 2023-2024.

The MDA systems business contributed £68.5 million of 2024-2025 revenue, with navigation systems adding £9.5 million. MDA systems accounted for most of the revenue growth. SRT is thus well placed for further growth, with a global sales network of more than 5,000 distribution and retail partners, established brands, proven products and new products under development.

How SRT Marine Systems has fared

SRT’s results for the year to end-June 2025 showed revenue of £78 million (up 426%), operating profit of £6.4 million and adjusted pre-tax profit of £4.9 million . (The adjustment removes a one-off £3.45 million non-cash exceptional finance cost, which guarantees a project performance bond for an important customer.)

The outlook for the business is thus “very positive”, as the chairman, Kevin Finn, says in the 2024-2025 report. And there is plenty of potential for more growth as “the world seeks to acquire a new generation of integrated systems that empower them with insight and intelligence” over the marine domain.

SRT has a market capitalisation of £203 million and does not yet pay a dividend because it is investing in new products and sales and service infrastructure. The shares currently trade at 80.5p and the forward price-earnings ratio is 18.3. The shares are up 96% over the past year and the future looks bright. As noted above, the company is in the process of delivering an initial set of contracts for five sovereign states worth £325 million and has good visibility on another £500 million out of its contract pipeline of £1.8 billion.

In addition, SRT is looking to broaden its product portfolio into digital on-board navigation and other related areas, such as aviation and Navy-related devices, where its core capabilities and technologies could give advantages. SRT is a relatively small company that has only recently moved into profit, but its growth prospects mean the risk is compensated for with potentially high rewards.

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Three years ago, OpenAI launched ChatGPT, sparking a surge of interest in AI and sending the stocks of many of the world’s largest technology companies soaring. However, in addition to the likes of Microsoft and Nvidia, shares in many smaller companies have also rocketed thanks to their role in building the infrastructure required for the adoption of AI. However, investors are starting to wonder whether all this investment in the new technology is likely to prove profitable.

Their doubts are having a knock-on effect on some of the more contentious AI-infrastructure plays, such as Coreweave (Nasdaq: CRWV). Coreweave makes its money from building data centres full of high-end computer hardware that provide the vast amount of computing power needed to train firms’ AI models; it leases the data centres to companies willing to pay for them. So far, this seems to have worked well, with explosive demand causing sales to rocket from $15.8 million in 2022 to an estimated $5.1 billion this year, a figure expected to more than double again to $11.9 billion by the end of 2026.

Coreweave's business model is unsustainable

However, if you look more closely, it becomes clear that the business model is unsustainable. Running data centres is a business that rewards scale, says Sahm Adrangi of Kerrisdale Capital, which is why it is dominated by large cloud-computing providers such as Amazon Web Services, Microsoft Azure, Google Cloud, and Oracle.

Coreweave’s relatively small size means that to compete with these players, it has had to offer large discounts and slash profit margins. What’s more, renting computer power can be a risky business because Moore’s Law means that most computer hardware becomes obsolete within a few years.

Andrangi argues that even in the best-case scenario, where demand for computing power continues to expand, Coreweave will struggle to make enough money to recoup the upfront costs of building the data centres, let alone make a decent return on investors’ money. If demand falters, the hardware becomes obsolete more quickly than planned, or firms start building their own data centres, then Coreweave could be in serious trouble, especially as it has taken on huge debts to finance its investment. Other red flags include the fact that the key insiders have started selling their shares in the company.

With Coreweave currently valued at around 10 times current sales, investors’ expectations for its future success are extremely high. And the market has been starting to get cold feet recently, with the stock falling by nearly a quarter in the last month alone. It is now down more than 50% from its highs this summer. This suggests that it is a good time to go short at the current price of $88, at £22 per $1. Given tech shares’ volatility, I suggest you cover your position if the price hits $132, which gives you a total possible downside of £968.

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Some of the best investments are in businesses that operate in relatively unknown but essential markets, working in the background and fulfilling functions that other companies either don’t want to, or can’t afford to do themselves.

One such business is Restore (LSE: RST), the leading provider of physical and digital document-management services in the UK. It stores documents for public- and private-sector organisations, such as the NHS, and destroys old documents. There’s also a document-processing business (called Synertec), which helps companies send electronic and physical communications and a technology division (Restore Technology). All of these help the company’s customers manage their data, whether it’s on paper or in digital form.

Restore is beating expectations

In 2024, Restore generated £275 /million in revenue. The largest proportion of revenue (£170 million) came from the information management division, the one responsible for storing and managing documents. Despite the global shift over the past 20 years away from physical to digital documents, there’s still a vast and steady market for this kind of storage and Restore, as the largest operator in this area, has the economies of scale required to make it work.

The City has raised questions about the sustainability of this business multiple times over the past few decades, yet despite these concerns, the firm has consistently outperformed expectations. It’s helped that Restore has been able to move into new markets, such as operating a “digital mailroom”, which scans and digitises inbound and outbound mail for clients. It also manages exam papers and physical document processes within government agencies.

The second-largest division is a business called “DataShred”. This does exactly what it says on the tin. It’s the largest document-shredding operation in the UK, servicing tens of thousands of companies every year. The third and fourth key divisions are Harrow Green, which helps companies move office, and the technology business. Restore has found that companies moving offices need to digitise and destroy physical records, although they often choose to store old records as well. Despite this, the company agreed this week to sell Harrow Green for £5.5 million in cash to focus on the core business.

Restore's exciting potential

The technology business helps clients manage their tech assets, such as laptops and desktop computers, to ensure security throughout the asset’s life cycle. Some of its biggest clients here are public bodies, such as the Department for Work and Pensions. Restore helps the department set up new laptops, test laptops in use, and erase as well as repurpose laptops when they come to the end of their life. It can process thousands of laptops a day and has a two-week turnaround window to get each computer back into the workforce. Laptops that are not going to be repurposed for new joiners can be securely and responsibly disposed of.

This division currently accounts for just 11% of group revenue, but it has vast potential. Management has highlighted the AI product cycle, the release of Windows 11 and the beginning of the post-Covid technology refresh cycle as structural drivers for growth. The current best practice is for companies to refresh technology every three to five years. Overall, the firm has 500 active customers at present, served by 310 employees, with the capacity to refresh 13,000 assets a week.

The technology business has exciting potential over the coming years, but investors shouldn’t overlook the document side of the organisation. To bulk out this division, in March, Restore paid £33 million to acquire Synertec, which owns a proprietary software platform that helps clients communicate with their customers across different channels. Using the software, clients can upload customers’ communications to Synertec’s systems and select how they want the information to be distributed.

This can include documents printed in braille, for example, or communications sent out via text message. Synertec can turn around the client’s data request overnight, a key selling point for its largest client, the NHS, with which it recently agreed a new four-year framework set to start in the first quarter of next year. Synertec also works with clients such as P&O Ferries, Screwfix and Hotpoint.

A new direction for Restore

Despite its strengths, shares in Restore have declined by around 50% since the pandemic, even as adjusted profit before tax has risen from £23.2 million in 2020 to £34.4 million in 2024. Lack of confidence in the company’s strategy, multiple compression and general apathy among investors towards UK small caps all appear to be to blame.

However, after a change of management two years ago, the City is starting to come around to the growth story. Charles Skinner returned as CEO in 2023, after Charles Bligh, who joined as CEO in 2019, resigned. Skinner stepped down in 2019 following a decade at the helm of the group, during which time the shares returned more than 2,200%. Skinner has spent the past two years refreshing the group and its strategy, but the market is yet to factor in the changes.

According to analysts at Berenberg, the shares are trading one standard deviation below the 10-year average price-earnings (p/e) ratio of around 15; the same is true on an enterprise value to Ebitda basis. Berenberg has the stock trading at a 2026 p/e of 9.9 and a free cash flow yield of 8.3%.

Canaccord Genuity takes a similar view, with a p/e of 10 pencilled in for 2026 and a free cash-flow yield of 8.3%. What’s more, in its latest trading update, Restore reported growth ahead of market expectations, with margins returning above the medium-term 20% target, prompting a wave of analyst growth upgrades. This growth, coupled with a return to the company’s 10-year average valuation, could generate an upside of nearly 70% for the shares in the best-case scenario.

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Private credit is not the catchiest topic. Put it alongside AI or bitcoin, and you can see why it doesn’t make so many headlines. Yet there has been a growing stream of stories over the past year or so about the potential risks that could be lurking in the sector, to the point where big names such as Marc Rowan of Apollo apparently feel the need to step up and defend it.

Shares in Blue Owl Capital, which is exposed to some of the main worries that investors have about private credit, have fallen about 30% this year. It has done noticeably worse than private-markets peers such as Apollo or Ares, which are big players in private credit, but have a smaller proportion of their overall business there.

These jitters may be pretty much irrelevant unless you are investing in private credit. I am a little sceptical about it as an investment, but that doesn’t mean that losses will have much impact on other markets. If private credit has indeed taken lending off bank balance sheets – as supporters claim – it could even reduce the consequences of higher defaults.

Private credit's link to the AI boom

Still, investors who remember the global financial crisis will recall the structured finance boom – mortgage-backed securities (MBSs), collateralised debt obligations (CDOs) and an alphabet soup of other vehicles. These were also supposed to redistribute risks and make the system safer. They ended up doing the opposite. That does not mean that private credit is likely to do the same – there are very significant differences between direct lending and structured finance. It only means that investors should be alert to unexpected consequences.

One of the intriguing aspects of private credit is the growing link to the AI boom. Data centres cost a great deal of money and private credit seems to be funding more of it: UBS estimated in August that private credit to the tech sector had risen by $100 billion (or 29%) in 12 months.

For example, Meta Platforms is building a $27 billion data centre in Louisiana, financed by Blue Owl’s funds. The accounting in this deal is intriguing: the liability is mostly off Meta’s balance sheet on the basis that the tech giant only enters into a four-year contract, renewable every four years – even though it provides a “residual value guarantee” to protect bondholders if it doesn’t renew. Still, Meta is probably good for the money. Some of the other data-centre firms will not be if their customers walk away.

Does this mean that an AI bust would ripple through credit markets, spreading the pain more than expected? Who knows. That’s the problem with private markets. It’s hard to see where the risks lie and who might be left holding the bag.

MoneyWeek has launched a new weekly email newsletter called Investing Spotlight. Dan McEvoy – who has written here on AI and other topics in recent months – will discuss the latest news and trends in investing. Sign up to the MoneyWeek newsletter to get it every Friday evening.

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Trustpilot (LSE: TRST) is a unique business on the UK stock market. It sits at the intersection of technology and consumer confidence by helping people to make better-informed choices, while giving companies a seal of credibility. Its platform allows users to rate and review businesses they have bought from, creating a feedback loop that benefits both sides. The firm earns its living by selling subscriptions to businesses that want to access review data and use Trustpilot’s marketing tools to boost their reputation.

How Trustpilot went global

Trustpilot was founded in Copenhagen in 2007 by Peter Holten Mühlmann, then a university student. His idea came about as he observed his parents’ struggle to trust companies they were buying from online. His start-up set out to bring transparency to online commerce by letting customers review the companies they dealt with. The concept took off and within a few years Trustpilot had become a global name. It was listed on the London Stock Exchange in 2021. Mühlmann stepped down as chief executive in 2022 and was succeeded by Adrian Blair, formerly chief operating officer at Just Eat.

The company’s strategy is based on a “freemium” model. Any business can create a profile for free, but more advanced features are locked behind paid tiers. This approach encourages adoption while nudging users to upgrade. Over time, the brand itself has become a valuable asset. A strong rating on the platform lends instant credibility, making the service a near-essential cost for any online business. That gives Trustpilot a meaningful degree of pricing power. By mid-2025, users had posted more than 330 million reviews, reinforcing Trustpilot’s position as one of the most trusted sources of consumer feedback.

Trustpilot builds a value ladder

Trustpilot’s subscription model has four main levels. The free tier gives businesses basic visibility, but serious users tend to move up quickly. The Premium plan, at $299 per month, includes verified reviews and marketing tools. The Advanced plan, at $629, adds data analytics such as TrustScore forecasting and competitive benchmarking. The Enterprise plan is from $1,099 for deeper analytical and system integration. Bespoke pricing continues to rise at this level to allow customisation.

The most expensive plans deliver sophisticated business intelligence that is difficult to replicate elsewhere. This structured pricing encourages customers to upgrade over time. In the first half of 2025, the average annual contract value rose by 17%, suggesting the company’s strategy is working well.

Trustpilot’s biggest opportunity now lies in getting existing customers into these premium tiers. Enterprise clients, who pay more than $20,000 a year, have been growing at a rate of 38% over the past two years, though from a small base. These accounts are highly profitable and make the platform deeply embedded in clients’ operations, reducing the risk of them cancelling subscriptions.

The company is also developing a new product line called TrustLayer, which aims to monetise its vast data set in new ways. Using verified review data, TrustLayer will provide analytics and insights to help businesses make better decisions. Launched this year, it is hoped that it will open a valuable new revenue stream with strong profit potential. The company’s average annual contract value now stands at $9,781, confirming that its move upmarket is paying off.

How Trustpilot is building trust through its technology

Trustpilot’s reputation depends entirely on the authenticity of its content. Fake or manipulated reviews are an ever-present threat, and regulators such as the UK Competition and Markets Authority have taken a keen interest in ensuring the platform remains transparent.

Maintaining integrity is therefore a constant battle, and the company spends heavily on detection technology to root out fraud.

Competition is also a risk. Google Reviews dominates local searches, while specialist sites cater for niche markets such as restaurants or travel. This fragmentation could limit Trustpilot’s expansion outside its e-commerce heartland.

Meanwhile, advances in AI make it easier to generate realistic fake reviews, raising the bar for Trustpilot’s moderation systems. Yet the company’s scale, and investment in detection technology, make it difficult for smaller rivals to compete on trust and authenticity.

Should you invest in Trustpilot?

At roughly £800 million in market value, Trustpilot trades on roughly three times forward sales – a premium to most UK-listed software firms, but modest compared with high-growth US peers. Over the next few years, revenue is expected to grow by mid-teen percentages and margins to expand as more clients move to higher tiers.

The closest comparable model is Yelp in the US, though Trustpilot’s global reach and business-to-business focus set it apart. Google is the dominant generalist, but Trustpilot’s neutrality and transparency give it an edge among firms seeking independence from big tech platforms. In Europe, few rivals match its scale or brand recognition. This blend of characteristics explains the market’s willingness to price in further growth.

The firm is not without risks, nor is it yet highly profitable, but its importance to the functioning of digital commerce is growing.

Trustpilot has built a defensible position in one of the most critical areas of the internet: the infrastructure of trust. For investors looking for exposure to the backbone of e-commerce, it remains a company worth watching.

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Artificial intelligence (AI) dominates the stock market headlines, and the energy companies powering the technology could be sound investments for those looking for a reliable means of exposure.

Many investors are increasingly concerned about the amount of investment being poured into AI infrastructure, and energy stocks could be one means of maintaining exposure to the theme without over-investing in some of the market’s more over-saturated stocks.

With companies like Nvidia and the Magnificent Seven dominating the global stock market, it is difficult for investors to know whether to stick or twist with big tech megacaps. Valuations appear stretched and there are increasing fears that the AI bubble could burst.

But the downside risk if the AI rally is set to continue leads to significant FOMO. AI appears to be having a dramatic impact across all areas of business, and investors won’t want to be left out of any potential future gains.

“Regardless of your standpoint on the AI stocks valuation debate, there is an alternative way for investors to gain exposure to this monumental growth sector,” says Nick Lawson, founder and CEO of Ocean Wall. He says that this approach hinges around identifying the key bottleneck for the industry.

“That bottleneck is power,” said Lawson.

How much energy does AI use?

Data centres are the fastest-growing consumers of energy in the US. Analysis from Goldman Sachs suggests that data centres will account for 11% of all US power demand by 2030, up from 4% in 2023. AI data centres are expected to account for 39% of total data centre power demand by that time.

That demand could lead to energy supply being seriously stretched. Morgan Stanley analysts predict a US power shortfall of 44 gigawatts (GW) by 2028.

Bridging that gap will require the deployment of innovating “time-to-power” solutions such as natural gas turbine transactions, nuclear reactors or private fuel cells.

That same bottleneck is playing out across the world.

“In the UK, new data centres will have to be developed in sites that can connect to the power grid and be supplied with reliable and, ideally, low-carbon energy,” says Ashley Thomas, infrastructure & renewables research analyst at Winterflood Securities.

“This means that securing power and a grid connection has become vital when evaluating a data centre location or project,” Thomas added.

“In a market defined by scarcity of power – and scarcity of time – astute entrepreneurs are spotting the opportunity, and investors alive to their vision are piling in,” said Lawson.

How to invest in AI energy

Lawson highlights Fermi America (LON:FRMI) as one of the most promising AI energy investments. It is developing private grids, in recognition of the inability of the US or European grids to supply power on the scale and with the reliability that AI requires.

“Their solution is an 11-GW hybrid campus in Amarillo that combines clean natural gas, solar power, battery storage, nuclear baseload and fibre-rich connectivity directly beside the next generation of data-centre clusters,” says Lawson.

Fermi’s stock has nosedived since its 2 October IPO, but Lawson attributes this largely to the market over-reacting to a three week delay in the first $150 million payment from a prospective client.

“As big tech begins treating energy as strategic infrastructure, Fermi, and other companies that take its lead, will emerge as the investable bridge between digital demand and physical power, and one of the few ways to gain pure-play exposure to the US AI-energy nexus,” says Lawson.

But Fermi’s volatility shows the risks in investing directly in this market. It can pay to invest in AI energy stocks through an investment trust. This offers exposure to smaller, sometimes private companies that can be harder to invest in directly, as well as offering the expertise of an active manager researching the individual investments.

“The closed-ended investment trust structure is particularly well-suited for investing in hard to sell assets like data centres and energy infrastructure,” said Annabel Brodie-Smith, communications director at the Association of Investment Companies (AIC). “Investors can buy and sell their shares on the stock market while their fund managers can take a long-term approach to their portfolio.”

Ben Newell, analyst at Investec, highlights Pantheon Infrastructure (LON:PINT) as one potential option.

“Pantheon Infrastructure’s exposure extends through its power and renewables holdings,” says Newell. These include Calpine, a major gas-fired power producer, and Intersect Power, a US renewables developer.

“Both are well-positioned to benefit from rising energy demand driven by the demand for [AI] data centres,” said Newell.

Yesterday (30 November 2025) marked the three year anniversary of the public launch of ChatGPT, an app that has since become almost synonymous with generative artificial intelligence (AI) and has driven a stock market boom in the process.

Those three years have seen AI stocks rocket to the top of the stock market agenda, and no publicly-listed company has embodied this rise more than Nvidia (NASDAQ:NVDA). The chip design behemoth’s revenue has increased tenfold in that time, becoming the first company in history to be worth $4 trillion, then (briefly) $5 trillion.

“ChatGPT has fundamentally shifted the investment landscape,” said Victoria Scholar, head of investment at Interactive Investor. “Its birth and proliferation have fuelled investor excitement around how AI can enhance all corners of the economy.

“Public companies that have adopted and run with AI have been rewarded and those who have not have been punished. Companies that have positioned themselves at the heart of the AI revolution have benefitted with skyrocketing share prices,” Scholar added.

OpenAI, the developer behind ChatGPT, is arguably the main driver underpinning this stock market revolution. While its shares are currently unavailable to buy directly for most retail investors, OpenAI still has the ability to shift the entire stock market through its announcements. This has been clearer than ever in the third year following ChatGPT’s public launch.

Nvidia’s shares gained 3.9% on 22 September following news of a deal that would see Nvidia invest up to $100 billion into OpenAI incrementally, in return for the ChatGPT-maker deploying up to 10GB of Nvidia’s hardware.

Oracle’s (NASDAQ:ORCL) stock gained 36% on 10 September following an announcement that OpenAI was planning to spend $300 billion on its computing infrastructure. But shares in Oracle fell by 30% in the month to 13 November as doubts emerged over the feasibility of these commitments.

Profits are a concern after three years of ChatGPT

While OpenAI is arguably more influential than ever, questions over the long-term economics of its business, which ultimately hinges on ChatGPT, have been asked increasingly loudly during ChatGPT’s third year.

Analysis from HSBC Global Investment Research indicates that OpenAI won’t be profitable by 2030, eight years after ChatGPT’s launch, despite assuming that its user base rises from 10% of the world’s adult population (excluding China) to 44% during that time.

The analysis suggests that OpenAI’s cumulative free cash flow and other sources of income (such as cash injections from Nvidia) will fall $207 billion short of its costs, largely computing requirements, over the period.

These numbers assume that OpenAI’s revenue will increase from around $12 billion in 2025 to $214 billion in 2030. That is the first year in which HSBC expects OpenAI’s revenue to outweigh its annual cloud compute costs (which it estimates at $207 billion in 2030, up from $193 billion the year before).

It is these kinds of calculations that are spurring fears of an AI bubble bursting. While Nvidia’s earnings have undoubtedly ballooned since the launch of ChatGPT three years ago, the future growth that many expect it to post won’t materialise if one of its biggest customers is unable to sustain its spending.

Will OpenAI IPO?

While OpenAI is still a private company, there is increasing speculation that it could be set to list on public markets – indeed, its need for cash to fund its infrastructure spending commitments could hurry this along.

Reuters reported on 29 October that OpenAI was lining up an IPO that could value the company as high as $1 trillion, citing three unnamed people familiar with the matter.

The report claimed that the IPO could take place as soon as the second half of 2026, and was expected to raise a minimum of $60 billion.

The timing and valuations are of course subject to change, but if the $1 trillion figure is realised it would represent a near-doubling of OpenAI’s latest valuation. Earlier in October, the company raised $6.6 billion at a $500 billion valuation.

However, Dan Moczulski, UK managing director at eToro, does not believe that an IPO is the natural next step for OpenAI.

“Their focus is likely to be on building a more profitable and sustainable business model, which could include new ways to monetise the free versions of ChatGPT, such as advertising,” he said. “Their technology now sits at the centre of so many industries, including finance, that long-term stability will matter far more than rushing into the public markets.”

Plenty of influential investors have been trimming or offloading stakes in Nvidia as the AI boom draws a growing number of sceptics. But none has attracted attention quite as much as Michael Burry, says Bloomberg. The hedge funder, famous for correctly betting against the US housing bubble ahead of the 2008 financial crisis – as chronicled in Michael Lewis’ The Big Short – has become a fixation. “We’re obsessed with contrarian investors” who make “concentrated ‘hero bets’ on macro outcomes”.

Burry’s allure is especially strong among online retail investors, who have helped drive the values of firms such as data-intelligence specialist Palantir into the stratosphere, says the Financial Times. Hence the recent fury of the group’s “voluble” boss, Alex Karp, when Burry informed his 1.4 million followers on X that he had taken a sizeable $900 million short position on Palantir’s stock. Karp described Burry as “bat-crazy”. Yet arguably, he has had the last laugh. Within a fortnight, Burry announced that he is winding down his hedge fund Scion Asset Management – a measure of what a “brutal era” this has been for many bearish investors as the stock market has marched relentlessly higher.

Who is Michael Burry?

At 54, Burry stands out even among the colourful characters who are attracted to short selling. A self-described loner (who has nevertheless married twice) he told Michael Lewis that “my nature is not to have friends… I’m happy in my own head”. Born in 1971, and raised in San Jose, California, he lost his left eye to a rare form of cancer called retinoblastoma at the age of two and has worn a prosthetic eye ever since, says Investopedia. He later discovered he also has Asperger’s syndrome. After studying English, economics and medicine at the University of California, Burry was initially bent on pursuing a medical career. “However, his new hobby – picking stocks – engaged him more than the messy world of medicine,” says the FT. When his residency ended in 2000, he quit the profession and set up an investment firm, naming it Scion Capital, after The Scions of Shannara, a 1990 fantasy book by Terry Brooks.

Burry started out as a value investor, buying into unloved companies he felt were extremely undervalued. A lover of heavy metal, he developed a reputation as a head-banging, fiercely contrarian money manager. “If you are going to be a great investor, you have to fit the style to who you are,” he told Lewis. “The late ’90s almost forced me to identify myself as a value investor… I thought what everybody else was doing was insane.”

By 2005, he had trained his focus on what a collapse of the US housing market would do to mortgage bonds – later crediting his insights to his neurodiversity, says The Guardian. As he observed: “Only someone who has Asperger’s would read a sub-prime mortgage-bond prospectus.” Burry’s decision to bet against the mortgage market prompted anger from investors, who felt he was abandoning a profitable strategy. However, between November 2000 and June 2008, the fund returned 489%. Those investors who stuck with him made $700 million, while Burry made personal profits of $100 million.

Yet for many professionals, Burry’s performance since then has been “distinctly ho-hum”, says the FT. Burry, who has launched a new subscription newsletter called Cassandra Unchained, has seemingly retired from investing before – closing Scion Capital after his bets against subprime mortgage bonds paid off in 2008 before reopening as Scion Asset Management a few years later. As he wrote on X shortly before filing for the wind-down of his fund: “Sometimes we see bubbles. Sometimes, there is something to do about it. Sometimes, the only winning move is to not play.”

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While investors’ attention has been focused on Europe’s rearmament, the Indo-Pacific region is starting to undergo an equally significant military transformation. Japan has embarked on its largest increase in defence spending since 1945, while South Korea, India and others are also boosting budgets.

At the centre of this regional build-up sits Australia, a key US ally and logistical hub for its Indo-Pacific strategy. The country is investing heavily in submarines, patrol vessels and base infrastructure to strengthen its own defences and support allied operations, while also being home to one of the world’s few pure-play defence-drone companies. The following three Australian companies highlight the growing investment case for Indo-Pacific defence stocks as regional governments rearm and modernise.

Three defence stocks to consider arming your portfolio with

Austal (Sydney: ASB) is an Australian shipbuilder, supplying fast patrol-vessels, coastal craft and support ships. A hallmark of the Indo-Pacific region is long distances and contested coastal waters, making these lighter and agile vessels essential for surveillance and maritime deterrence. Domestic demand is strong, with Austal recently delivering its ninth Evolved Cape-class Patrol Boat to the Royal Australian Navy.

Austal also contributes to Australia’s wider security strategy by building the patrol boats that Canberra provides to Pacific Island nations such as Fiji and Samoa under the Pacific Maritime Security Program. The year to 30 June 2025 saw revenue grow by 24% , while earnings before interest and tax doubled.

Ventia Services Group (Sydney: VNT) provides the infrastructure and base-support services that Australia’s defence capabilities rely upon. This includes maintaining bases and training areas across the country. This service has become more important as the country strengthens its military posture in northern Australia and deepens co-operation with the US amid growing tensions in the region.

In September 2025, Australia’s Department of Defence awarded Ventia two Base Services Transformation packages worth A$2.7 billion (£1.3 billion). The department says these contracts ensure that “bases and training areas are safe and secure, and support people as they live, train and work on the Defence estate”. Profits are growing steadily. In the first half of 2025, net income rose 11.9 %, with earnings per share up an annual 16.5%. With long-dated, government-backed contracts, Ventia offers exposure to the infrastructure side of the Indo-Pacific defence build-up.

Drones have become a grim fixture of the ongoing war in Ukraine, prompting many countries to build up their own drone forces. But the other lesson many have learned is the importance of counter-drone technology: defence equipment that can disable or fight off drone attacks. The US has identified counter-drone capabilities as of its of 17 key priority-spend areas, while the EU is developing a “drone wall”.

DroneShield (Sydney: DRO) is well positioned to benefit as it specialises in counter-drone technologies. The Australian company develops and manufactures systems that detect, track and neutralise hostile drones using radar, radio-frequency and AI-enabled software. The group has a global customer base, with the Indo-Pacific region as a core segment. The largest slice of its sales comes from Europe, accounting for 36% of revenue. Asia ex-China makes up 29% of sales. In the first half of 2025, DroneShield reported record revenue of A$62.3 million, up nearly 210% year-on-year, and delivered its first-ever net profit.

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It has been a busy year for large companies’ IT departments. Firms ranging from Marks & Spencer to Jaguar Land Rover (JLR) have seen their operations disrupted by cyberattacks. The incident at Jaguar is thought to have cost Tata (JLR’s owners) just under £2 billion. While not a cyberattack, the outage at Amazon Web Services in October also brought swathes of the internet to a halt, demonstrating that “when a single upstream provider experiences issues, the impact doesn’t stay contained; it cascades across industries”, says Fadl Mantash, chief information security officer of global pay-tech company Tribe Payments. Such cases are just the “tip of the iceberg”, according to Jonathan Frost, director of global advisory for EMEA at BioCatch. No wonder, then, that companies providing cybersecurity and resilience services are in demand.

Why cybersecurity is more important now than ever

The main reason cybersecurity and cyberresilience are so important now is that “an increasing amount of life is conducted online, with almost all our devices connected, in some way, including vacuum cleaners and washing machines”, says Marijus Briedis, chief technology officer at NordVPN. However, while people “still don’t fully realise how much data they are sharing and how much connectivity is happening”, there is a growing awareness that “they have to take care with their online activity and need some protection from the various threats… out there”.

This is particularly true of the post-Covid business world, “where people are increasingly working away from the office”, says Kate Steele, partner in the commercial dispute resolution team at Hill Dickinson. As a result, companies “are relying much more on technology, both in terms of remote working systems, but also things like AI”. And “all the various crime statistics suggest that there has been a huge increase year on year in every type of cybercrime, from data theft to online scams”, says Steele.

BioCatch’s Jonathan Frost, who previously worked at the City of London Police, notes that in the 2025 National Crime Survey, 1% of all UK companies said they had been victims of ransomware, where servers are hijacked, legitimate users locked out and then cash demanded to hand back control. While 1% may not seem much, “this works out to 19,000 firms across Britain, and represents a doubling of attacks since 2024”.

What’s more, companies may not have a choice as to whether they protect themselves, says Hill Dickinson’s Kate Steele. This is because governments and regulators are now recognising “that companies need to take action to defend themselves, as such attacks not only harm them, but also hurt their customers, employees and other people in their care”. Witness the UK’s Cyber Security and Resilience (Network and Information Systems) Bill, currently going through Parliament, “which places an obligation on critical sectors to report major incidents within 24 hours, with large fines if they don’t”.

It’s not surprising, then, that over the last five to 10 years, discussions about such cyberthreats are no longer “the background conversation that only took place in certain industries and businesses”, says Brendan Gulston, co-manager of the WS Gresham House UK Multi Cap Income Fund. Instead, cybersecurity is “a board level discussion that is mentioned in almost every annual report of most of most businesses, irrespective of industry”, says Gulston. Overall, data from accountants PwC suggests that around 85% of businesses expect their cyber budgets to increase over the next 12 months, says Zain Javid, cofounder and chief technical officer of Citation Cyber.

The three key threats to cybersecurity

NordVPN’s Briedis thinks the increasing number of threats stem from three main sources. There are the so-called “script-kiddies”, the kids “playing around the internet and trying to figure out how to hack your neighbour”. However, there is also an increasing threat from cybercriminals, many linked to organised crime, who are targeting companies. They typically either try to steal commercially sensitive data or launch ransomware attacks.

Even worse, “in a growing number of cases many countries now have their own cybersecurity groups that specialise in carrying out attacks”, says Briedis. Jonathan Frost agrees, noting that Europe “is facing increased hostile activity across cyber, infrastructure and information domains from regimes such as Russia”. These so-called “hybrid conflicts” are “below the threshold of war but above the threshold of normal state relations”. For example, this year “the Dutch authorities identified a cybersabotage attack on the digital control system of a Dutch public service”, which they eventually traced back to the Russian state. Russia is also considered the prime suspect for the JLR attack.

North Korea, too, is “always at or near the top of the list of hostile states, as is Iran and China”, says Chris Gannatti, global head of research for WisdomTree. He points out that earlier this month AI start-up Anthropic claimed that Chinese hackers had launched cyberattacks against them in an attempt to co-opt Claude, their AI system, so that it could be used for sinister purposes. With such a close connection in the digital world between data and sovereignty, “it’s unsurprising that the rise in geopolitical tensions has coincided with the rise in cyberattacks against civilian or government infrastructure”, says Axel Belorde, head of business development for EMEA & Asia at VettaFi.

AI is ushering in a new era of cybercrime

Anthropic’s experience highlights the fact that, as nearly all the experts I spoke to agreed, AI is showing “the ability to expand cybercrime exponentially”, says NordVPN’s Briedis. With generative AI allowing for “vibe coding” – the ability to create programs by simply specifying what you want to create – even the least technically savvy hacker “can type something into ChatGPT and create a simple virus or malware in seconds”.

While many of the larger AI models are desperately trying to build in safeguards to prevent this, they may be too late – “for a few thousand pounds you can get access to your own bespoke AI system that won’t have any of these restrictions”, says Briedis.

As AI becomes ever more sophisticated, its use could expand beyond simply making it easier for hackers to write malicious code. AI could create “agentic” programs that can be sent out to wreak havoc on their own, without the need for constant human direction. Tom Kynge, portfolio manager at Sarasin & Partners, says that even before the Chinese attack, tech start-up Anthropic had done “some really interesting testing on this front, with results showing that AI systems can demonstrate behaviours such as deception, creative problem-solving and manipulation”.

AI-powered social engineering can make things worse

AI can also help hackers carry out what’s known as “social engineering”, where hackers persuade people to voluntarily hand over important security details by impersonating friends, family, colleagues or customers. This matters because, as security companies have become better at bolstering defences against viruses and security breaches, “cybercriminals are increasingly focusing on social engineering”, says Rupert Small, founder and CEO of Egregious, an analysis platform that aims to protect the internet from AI deception. He notes that in some cases, the latest models can “make us believe whatever they want us to… that completely transcends what any other human can do, including your own close family”.

Silver-tongued chatbots and deep-fake videos represent the cutting edge of social engineering. But more mundane AI tools can also pose a threat. Hill Dickinson’s Kate Steele says hackers are already using AI “to send out random emails to a large number of people at a much larger scale than they were previously able to”. What’s more, generative AI is ensuring that, “while the emails from fraudsters used to be easy to spot, as the grammar or spelling wouldn’t be quite right, they are now much more convincing”.

On a more positive note, there is evidence that AI can be used to defend us against security threats as well as create them. “There are many start-ups, many of them created in the UK, which are using AI to detect scams created by social engineering and phishing,” says Small. All the evidence so far is that AI “can be very good at detecting such scams at scale”. Those using AI for defensive purposes may be “a few steps behind” those using it for criminal purposes. However, “the defensive tools definitely exist, it’s just a question of getting them adopted”.

Cat McDonald, a partner at venture-capital firm AlbionVC, takes a similar view. Using AI to detect fraud can lead to false positives, yet AI can also “help find patterns that wouldn’t be visible to the human eye, allowing you to defend yourself far better and quicker than you would be able to do otherwise”. NordVPN’s Briedis notes that his company is already using its own machine-learning algorithms to combat phishing and scam sites. In the future, cybersecurity “is going to be increasingly AI versus AI”, says Briedis.

Threat from quantum computing

AI isn’t the only technology “shaping the next cyber battlefield”, says Citation Cyber’s Javid. Quantum computing is also seen as a threat. The exponentially faster computing speeds it promises mean it will become possible to break encryption systems that normally would take thousands of years to crack using today’s technology, rendering them “irrelevant”, says Tom Peirson-Webber, VP of engineering at Harbr Data. This future might be less distant than people think. The UK’s National Cyber Security Centre suggests that companies “should plan on being quantum-ready sometime between 2030 and 2035”.

IBM has predicted that by 2029, “we’re going to start getting useful outputs from quantum machines that are beyond the reach of classical machines”, notes WisdomTree’s Gannatti. Certainly, “there’s been a lot of talk in both the encryption and cryptocurrency communities about how to deal with this emerging threat, with several start-ups working on how to make encryption quantum-proof”. In a sign that the threat is being taken seriously at the highest levels, the National Institute of Standards and Technology in the US has published papers on how quantum-safe encryption standards could work.

However, even if quantum-proof encryption methods are developed in time, they will still need to be rolled out. While Peirson-Webber likens the problem to the millennium bug, where many people worried about the impact of the date change on computer systems, only for the transition to go relatively smoothly, this is not as reassuring as it might sound. After all, the millennium bug was only overcome “because people started planning for it in 1990, rather than leaving everything to the last minute”, a mistake he worries that some companies may be making. Another risk comes from “people stealing encrypted data today, in the hope that quantum will enable them to decrypt it in a few years’ time”.

Big winners in the growing demand for cybersecurity

So which type of companies will benefit the most from the boom in cybersecurity? AlbionVC’s McDonald thinks the industry is dominated by a “few, very large platforms offering a broad suite of services”. These platforms “have strong brands, established trust and are liked by the security teams of large organisations, who are completely overwhelmed by the large number of solutions out there and find that having a one-stop shop can be very helpful”.

However, she also notes that the recent wave of both security breaches and outages have shown the downsides of having too much consolidation “and made enterprises a little more cautious about having all of their eggs in one basket”. She also notes that many of the large platforms “have reached the stage where they are not able to innovate quickly enough”. This is creating opportunities for “a lot of very exciting early-stage cybersecurity companies, including many coming out of academia, that are looking for solutions that can help defend against new attacks”.

Similarly, VettaFi’s Belorde thinks the recent AWS outage “is a good reminder that there is rarely such thing as 100% reliability”. Companies need to “carefully assess their remedial plans”. In the case of security services, that means having multiple providers, while with regard to storing their data, it makes sense to ensure that cloud storage isn’t the only option used, with the most confidential data stored on properly secured physical servers. In short, the “growing need for more innovative cybersecurity solutions” will benefit an “entire ecosystem of companies”.

How to invest in the cybersecurity sector

The easiest way to invest in companies benefiting from the boom in the cybersecurity sector is through an exchange-traded fund (ETF) tracking a broad portfolio of cybersecurity firms, such as the WisdomTree Cybersecurity Ucits ETF (LSE: WCBR). WidsomTree has built a portfolio of 25 firms by asking experts who have worked at a range of organisations, including the US National Security Agency, to find companies that will benefit from what it sees as eight key themes, ranging from cloud security to cybersecurity education. The largest holding is Crowdstrike, which accounts for 7% of the ETF, with the top ten accounting for half the fund. It has a total expense ratio (TER) of 0.45%.

The third-largest company in WisdomTree’s portfolio is Akamai Technologies (Nasdaq: AKAM). Although its core business used to be providing a secure connection between the user and an internet site, it has recently shifted towards providing services for cloud computing, including cybersecurity. Unlike many companies in the sector, Akamai is not only profitable but also trades at a relatively modest valuation of less than 13 times expected 2026 earnings. Nonetheless, it has a consistent record of solid growth of around 6%-7% a year, with revenues rising 40% between 2019 and 2024.

Another major holding in WisdomTree’s portfolio is Qualys (Nasdaq: QLYS). Qualys provides a comprehensive set of cybersecurity services over a cloud-computing platform. It has a strong record of growth, nearly doubling sales between 2019 and 2024 while increasing its earnings per share over the same period. It boasts strong operating margins and a return on capital employed of more than 30%, which makes the fact that it trades at 21 times expected 2026 earnings seem more than reasonable.

One cybersecurity company that Tom Kynge, portfolio manager at Sarasin & Partners, deems one of the “winners” when it comes to firewalls (a barrier designed to prevent unauthorised people gaining access to a network) is Fortinet (Nasdaq: FTNT). Rather than just providing a single service, it offers a platform that provides a wide range of services, from secure networking to AI-driven security operations. It has nearly tripled sales since 2019, with earnings per shares increasing more than sixfold. That justifies a 2026 price/earnings (p/e) ratio of 28.

Another cybersecurity firm Kynge likes, and a major holding of HANetf’s Future of Defence Ucits ETF (Nato) – VettaFi’s Axel Belorde is also involved with this ETF – is Palo Alto Networks (Nasdaq: PANW). Its divisions include Network Security, Cloud Security and Security Operations. It also has a Threat Intelligence and Advisory Service. Even though the stock trades on a 2026 p/e of 47, revenue has more than doubled since 2021, and the group is expected to keep expanding strongly.

One smaller company that should also benefit from increasing corporate awareness of cybercrime in fraud is PCI-PAL (LSE: PCIP). PCI-PAL specialises in ensuring that a firm’s payment systems are secure, so they can take payments over the phone or online without risk of fraud. Brendan Gulston of the Gresham House UK Multi Cap Income Fund thinks that PCI-PAL is “a great example of a company that, while not seeking to provide cybersecurity directly, has developed a product that is in demand because of companies’ worries about fraud”. PCI-PAL is a riskier investment as it has only recently started to become profitable, but it has seen revenue grow fivefold since 2020.

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What's the issue with the internet?

The vast majority of the world’s population relies on the internet every day for work, communication, banking and social life. But the network’s ubiquity means that its frequent collapses and outages, and vulnerability to attacks by malign actors, are becoming ever more worrying. In October, a minor technical problem at an Amazon facility in Virginia knocked out Instagram, Hulu, Snapchat, Reddit and ChatGPT. Internet-connected devices – from smart speakers to fancy temperature-changing mattresses – malfunctioned in their millions. But that was pretty minor stuff. In July 2024, about 8.5 million computers worldwide suddenly crashed, displaying blue screens and leaving businesses struggling. The outage was linked to CrowdStrike, a security vendor for Microsoft, and the issue was caused by a bug in a routine software update.

Why is the internet so fragile?

Because beneath the gleaming, gigabit-broadband surface lies a patchwork of ageing infrastructure, brittle protocols, concentrated corporate control and geopolitical tensions that routinely push the global network to its limits. Some of that fragility relates to how the internet originally grew – ad hoc, and in a cooperative spirit of amateurism – and the way it has since developed. It’s vulnerable because there are so many working parts, both digital and physical. The internet sits on a gigantic global network of complex physical infrastructure – from the undersea cables that circle the globe to vast server farms in Virginia run by Amazon Web Services (AWS).

Are the undersea cables protected?

More than 95% of global data travels through roughly 550 fibre-optic cables laid across the seabed. But far from being futuristic, these cables are highly vulnerable to very mundane threats – fishing trawlers, ship anchors – as well as earthquakes, landslides and sabotage by malign state actors. Repairs by specialist ships take days or even weeks. Naturally, the corporate giants protect their assets. But when technical issues disrupted operations at Amazon’s Virginia facilities in October, it temporarily crashed the internet for users around the world.

Internet Exchange Points

At a more local level, the internet relies on Internet Exchange Points (IXPs) – warehouse-sized facilities where networks interconnect – which handle vast amounts of national and international traffic. There are thousands worldwide, but a relatively small number handle an outsized share of global traffic, making them critical single points of failure. If an IXP goes down because of a fire, power failure, or cyberattack, large chunks of the global internet can disappear along with it.

What is the internet's digital structure?

The internet is inherently fragile because it’s a complex network – indeed a network of networks made up of millions of nodes – in which very small causes can have enormous global effects. Every message sent travels through a labyrinth of servers, routers, cables and sometimes satellites. Many digital services rely on the same gateways, load balancers, identity checkpoints and routing layers. A Cloudflare configuration file growing past its limit, a DNS pointer inside AWS vanishing, a Google service-control routing rule drifting – all these small glitches can pull whole systems sideways, with cascading global impacts. But even if the physical network were flawless, and the digital architecture impregnable, the internet would still be fragile thanks to the protocols that keep it running.

How internet protocols work

The most basic – or notorious – is the Border Gateway Protocol (BGP), which directs traffic between networks, but was never designed with security in mind. One mistaken update – or malicious reroute – can send traffic spiralling into black holes or hostile servers. Meanwhile the Domain Name System (DNS) – the internet’s address book, with its familiar suffixes – is technically decentralised, but in practice heavily reliant on a few major operators.

If one of these is attacked or fails, users can find themselves unable to reach major parts of the web, even if the websites themselves are perfectly healthy. Neither of these vulnerabilities are bugs in the system; they are legacy features of the early 1990s, when the internet became a mass-user network in a far more trusting and less interconnected era. Even today, says The Economist, the people who maintain the open-source code on which the internet operates often do so in their spare time.

Does the Cloud boost resilience?

No. The growth of the cloud, pioneered by Amazon, has made the internet more vulnerable and its control more centralised, says Will Gottsegen in The Atlantic. Once, setting up a website meant buying physical servers, procuring software licences and writing foundational code from scratch. Now, for a monthly fee, AWS and a few others own the servers and pre-write the code. The servers “are consolidated under a handful of companies”, so are the potential points of failure.

How can we strengthen the internet?

Widely cited ideas include overhauling critical protocols like BGP with built-in authentication; diversifying physical infrastructure, including more international cable routes and more regionally distributed IXPs; adopting multi-cloud strategies so organisations aren’t dependent on a single provider; building far more security into internet-dependent consumer products; using regulation to foster greater diversity of suppliers in web services; and establishing global norms, modelled on the rules of warfare, that prohibit targeting civilian infrastructure in cyberspace. The internet doesn’t have to be this fragile. But first we need to recognise how fragile it truly is.

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Canada’s stocks have enjoyed a revival this year. The S&P/TSX Composite index has gained 25%, eclipsing America’s S&P 500, up just 16%. Canada has been one of 2025’s best-performing developed markets, an early sign that the post-globalisation era will reward a very different set of winners.

With economies reshoring and supply chains shortening, the natural lottery of geography and geology has never mattered more. Few nations have hit the jackpot quite like Canada, which ranks among the world’s top-five energy producers and sits atop $1.7 trillion of natural-resource wealth from oil, gas and uranium to potash, gold and timber.

Crucially, Canada pairs this abundance with political stability and alignment with the West, which is a rare combination in a world of rising authoritarianism. As Washington turns inward, Canada’s calmer politics, under the steady hand of prime minister Mark Carney, could become a safe haven for investors seeking exposure to the decade’s defining themes without populist noise.

Canadian stocks for your portfolio

Canada’s most strategic energy resource may be uranium. As the world’s second-largest producer, it stands to gain as nuclear power returns to the global electricity mix. Governments are extending reactors’ lifespans, new builds are back on the agenda, and even the Magnificent Seven are investing in nuclear projects to power AI data centres’ colossal energy needs – demand that could require 50 new reactors by 2030.

After years of supply cuts following the disaster at Fukushima and the West’s retreat from dependence on Russian energy, markets are turning to reliable producers such as Canada. At the heart of this revival sits Cameco (Toronto: CCO), one of the world’s largest and most cost-efficient uranium miners. In partnership with Brookfield and Westinghouse Electric, it plays a central role in supplying Western markets. The shares look promising as miners scramble to restore supply after a decade-long glut. The infrastructure sector has benefited from nearshoring, electrification and decarbonisation. The $1.2 trillion US Bipartisan Infrastructure Investment and Jobs Act alone is funding more than 66,000 projects, while Carney’s industrial strategy aims to channel billions into Canadian clean energy, advanced manufacturing and critical minerals.

Stantec (Toronto: STN), a global leader in sustainable design and engineering, is a clear beneficiary. Its diversified footprint across energy, water and transport positions it perfectly for North America’s rebuilding cycle. A focus on efficiency has delivered industry-leading profit margins, while exposure to US and Canadian infrastructure spending bodes well for growth.

Canada’s answer to Nvidia

Technology is a further major driver of the portfolio. We first bought Nvidia in 2016 at an average price of around $1.35 and have benefited from its meteoric rise ever since. But we have found the next wave of opportunities closer to home.

Celestica makes high-speed components to expand global data centres. With Nvidia, OpenAI and Oracle investing hundreds of billions of pounds in new AI computing power, Celestica sits in the middle of the supply chain. With Celestica’s sales from AI-related hardware surging 80% last quarter, we can access all the disruption of Silicon Valley at a Canadian discount to heady US tech valuations.

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Technological improvements have unrecognisably changed much of the global economy in the last 30 years. But one area that remained steadfastly stuck in the past is one of the most fundamental parts of any economy – money. In recent years, however, a financial revolution began. Cryptocurrencies have been with us now for 16 years, but they bring with them a whole host of complexities that only the faithful are willing to overlook. In most cryptocurrencies acolytes lies the spirit of the rebel – somebody who wishes to sit outside the system with their wealth independent of oversight and away from traditional assets. Inevitably, this has roused suspicion that the main benefit of cryptocurrencies is as a cover for nefarious activities.

A different type of cryptocurrency has recently come to light – stablecoins. Where Bitcoin and similar digital currencies aim at tearing down the financial order, stablecoins’ purpose is to improve it. These digital assets, backed by real-world currency, are beginning to act as an important bridge between the traditional financial system and the burgeoning world of decentralised finance. At the forefront of this movement is Circle (NYSE: CRCL), a US-listed financial technology (fintech) business that is positioning itself to be a central player in this new global landscape.

What are cryptocurrencies?

Cryptocurrencies are essentially strings of data that represent value. The key characteristic is that they are fungible, meaning that any one unit is interchangeable with any other, just as a pound coin is equal in value and function to any other pound coin. The magic that makes these digital assets secure lies in the blockchain, a development that became possible with the internet.

A blockchain is a decentralised digital ledger, a record of all transactions, that is maintained across a vast network of computers rather than being held by a single central authority, such as a bank. To understand its power, consider the traditional system of double-entry book-keeping. When you send money to someone, both you and the recipient keep a record of the transaction. A bank acts as a trusted, private third party to ensure that both records match.

The blockchain introduces a different third party outside of the private banking system. The radical idea was that the confirming party in transactions was to be a public record, open to be seen and verified by anyone. Every transaction is recorded in a “block” of data and, once that block is verified by the network, it is added to a permanent, immutable chain of previous blocks – thus creating a blockchain. This open, unchangeable record is what makes the assets on a blockchain truly unique and resistant to fraud, as it removes the need for a single, central authority. Imagine a contract between two parties. Then imagine that this contract only becomes valid once the whole world can see it and it thus only becomes legal if everyone agrees. That is the essence of the blockchain.

The difference is that a contract is a unique, non-fungible asset. Because cryptocurrencies are fungible, they can be used to facilitate secure, peer-to-peer transactions without a middleman such as a bank. That is the fundamental idea behind the original cryptocurrencies such as Bitcoin.

The rise of stablecoins

The older digital currencies grabbed headlines due to their volatile price swings and the vast wealth they created for the mavericks who saw the potential early. Stablecoins may prove a more practical innovation. As the name suggests, they are digital assets specifically designed to maintain a stable value, and their value is typically pegged to a fiat currency such as the US dollar or the euro. There are different types of stablecoins, each with a different mechanism for maintaining their peg.

The most common and trusted type is the fiat-backed stablecoin, such as Circle’s USDC. The mechanism is simple: for every digital token created, an equivalent amount of a real-world asset is held in a reserve account. This backing provides trust and stability, ensuring the stablecoin can always be redeemed for its real-world dollar equivalent. Crypto-collateralised stablecoins, such as MakerDAO’s DAI, are backed by volatile cryptocurrencies and use extra collateral to manage risk. Algorithmic stablecoins, such as the failed TerraUSD, rely on complex programs to maintain their value, but can collapse. The recent public failures of algorithmic coins have highlighted the importance of transparent, asset-backed models such as Circle’s.

Circle, formerly Circle Internet Financial, is a prominent US-listed fintech business that has made this model its core mission. Its flagship product is the USD Coin (USDC), but it has since expanded to include the EUR Coin (EURC). The company was founded in 2013 and initially focused on Bitcoin payments before making a strategic pivot to stablecoins. Circle’s history is defined by its commitment to working within the existing financial and regulatory system. From its early days, it actively pursued regulatory approval around the world. It secured key licences in New York, the UK and Singapore.

This dedication to compliance has set it apart. By actively seeking regulatory clarity from the outset, Circle has positioned itself as a trusted partner for financial institutions and businesses. Unlike many of its competitors, rather than trying to replace the financial world order, it is trying to fix it. This is in stark contrast to its main rival, Tether and its USDT coin. Historically, Tether has operated with less transparency and a more decentralised approach, often drawing intense regulatory scrutiny. Tether remains the larger stablecoin by value of currency in circulation, but Circle’s strong focus on trust and following the rules has helped it grow quickly. Because of this, many large investors and businesses see it as a safe and reliable way to enter the world of digital assets.

Circle's new financial infrastructure

Beyond simply providing a digital dollar or euro, Circle is building a new financial infrastructure. This is where the concepts of the off- and on-ramp become critical. The on-ramp is the process of converting traditional currency into a digital one, such as moving dollars from your bank account to a crypto exchange to buy USDC. The off-ramp is the reverse. Currently, these two steps can be a barrier, often involving fees and delays. But the true power of a stablecoin system could lie in a frictionless future where on-ramping and off-ramping are less frequent. Once an individual or business holds their currency in a stablecoin such as USDC, they can transfer it to anyone else in the system instantly, at nearly no cost, and at any time of day. This “always-on” payment rail will bypass the traditional banking system and its associated fees.

This is already happening – in international remittances, for example, where a USDC transfer can take seconds and cost fractions of a penny. This stands in contrast to the traditional system, which can cost upwards of £20 and take several days. In a world of mass adoption, one could even receive a salary in stablecoins, then use them to pay for groceries or bills, all within the same digital system, unlocking a cheap, frictionless, financial life. Circle has actively pursued partnerships with major financial players such as Visa and Fiserv to turn this vision into a reality. These collaborations will allow traditional finance firms to integrate Circle’s technology, helping to bridge the gap and accelerate the adoption of USDC.

Most of Circle’s income comes from the interest it earns on the money that backs its stablecoins. Each USDC and EURC is supported by cash and short-term government bonds, which together provide a steady source of earnings. How much Circle makes depends mainly on two things: current interest rates and how many of its stablecoins are in use. It’s an attractive model, but not without its risks. In a high-interest-rate environment, the firm’s profitability soars. In a rate-cutting world, however, Circle’s revenue from this source would be directly affected.

Acknowledging this dependency, Circle is diversifying its income by offering a suite of software services and customisable interfaces that help businesses integrate stablecoins into their own operations. This includes its Circle Payments Network (CPN), which provides a transaction-based revenue stream that is less sensitive to interest-rate fluctuations. At present, these are small parts of Circle’s business, but they have the potential to become more important as the firm grows.

What the future holds with Circle

Circle’s strategy of working with regulators positions it to be centrally important to an emerging global financial framework. This is no longer a theoretical possibility, especially given the recent passage of the Guiding and Establishing National Innovation for US Stablecoins, or GENIUS, Act. This new US law is the first to set clear national rules for stablecoins. It says that only approved companies can issue them and that they must follow strict rules to protect users and remain transparent. Every stablecoin must be backed one-for-one with safe assets such as cash or short-term US government bonds. Circle has followed this approach from the start and proves it through public reports. The GENIUS Act is a big deal for a company like Circle. Many other stablecoin makers will find it hard to follow these strict new rules, but Circle’s business model was already set up to meet them. This new law provides the clear rules that banks, tech companies and large businesses need. They can now use stablecoins with confidence because the law removes the legal doubts that stopped widespread use before. Additionally, the Act bans stablecoins that don’t follow the rules and sets clear guidelines for foreign companies. This will probably make Circle’s USDC even stronger as a trusted, regulated choice in the market. It punishes companies that don’t meet this new “gold standard”.

By building a trusted, compliant infrastructure, Circle is not simply creating a new cryptocurrency. It is also helping to lay the groundwork for a stablecoin-powered financial system that could one day become the backbone of global commerce. In the process, it has the potential to make the company enormously profitable. The traditional banking world is on notice: the future of finance is here, and it is built on a foundation of stable, digital money.

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Nvidia (NASDAQ:NVDA), the world’s largest company by market capitalisation (market cap), beat expectations once again when it announced its results for the fourth quarter (Q4) of its 2026 fiscal year on 25 February.

Nvidia’s earnings per share (EPS) almost doubled from the same period a year ago, while quarterly revenue increased 73% to $68.1 billion.

Jensen Huang, Nvidia’s founder and CEO, attributed the eye-catching results to increasing enterprise demand for artificial intelligence (AI).

“Computing demand is growing exponentially – the agentic AI inflection point has arrived,” said Huang. “Enterprise adoption of agents is skyrocketing. Our customers are racing to invest in... the factories powering the AI industrial revolution and their future growth.

Nvidia’s stock gained as much as 3.9% in after hours trading immediately following the results’ release, before pulling back partially.

Traditionally releasing its results around a month after the rest of the Magnificent Seven group, Nvidia’s earnings release marks the climax of big tech earnings season.

Nvidia has been one of the most popular stocks with DIY investors and their professional counterparts for years, especially since November 2022 when ChatGPT’s public launch brought AI to the forefront of stock market attention.

In that time, Nvidia’s market cap has increased more than eleven times over. Nvidia became the first company to reach a $4 trillion market cap, and also briefly broke the $5 trillion mark.

But in recent months, Nvidia has come under increased pressure. Its previously stellar stock price gains have been hampered by fears that AI stocks constitute a bubble, and that its revenue and earnings growth could slow dramatically should this burst.

Shares in Nvidia gained 4.9% in 2026 through 25 February, the last session before Nvidia announced its Q4 results.

Nvidia’s earnings in detail

The headline figure was that Nvidia’s quarterly EPS rose 98% from the same period a year ago to $1.76, comfortably beating analysts’ expectations of $1.54.

^{Expected figures based on FactSet consensus estimates.}

Revenue from Nvidia’s key Data Center segment – which includes the AI GPUs that have underpinned the company’s rise to the pinnacle of the stock market – rose 75% to $62.3 billion.

Analysts at investment bank Wedbush Securities had expected Nvidia to post quarterly revenue for its key Data Center segment of $59.5 billion.

Nvidia also guided for revenue of $78 billion in Q1 of its 2027 financial year (roughly corresponding with Q1 of the 2026 calendar year), plus or minus 2%. This implies a 77% year-over-year increase in the upcoming quarter; a sign that Nvidia’s growth is accelerating rather than slowing.

“Expectations for revenues in 2026 and 2027 are clearly too low, and we expect to see a slew of analyst upgrades in the coming weeks on the back of these numbers,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown.

Can Nvidia keep growing its earnings?

Nvidia’s rapidly increasing revenue and earnings have been underpinned by the degree of pricing power it has, given there is a huge backlog of demand for its hardware.

With an effective monopoly on cutting edge AI chips, Nvidia is currently posting gross margins close to 75%.

That is unusually high for a hardware company, and it naturally invites competitors (and even some of Nvidia’s customers) to try to eat into those profits.

“Investors are questioning whether custom chips such as Google’s tensor processing units (TPUs) could pressure pricing,” said Lale Akoner, global market analyst at eToro ahead of the results.

It also faces increasing domestic competition in China, the world’s largest semiconductor market – as well as having its access hampered by trade policy disputes between Washington DC and Beijing.

“Questions will still linger over whether the current AI spending wave can sustain growth beyond the next few years, and whether Nvidia will remain as dominant as AI shifts from training models to running everyday tasks,” said Britzman.

But the strong results for the previous quarter and healthy guidance for the one upcoming ought to temper some of these concerns.

When does Nvidia next announce results?

There is currently no set date for Nvidia to announce its next set of results after these (covering Q1 of its 2027 financial year).

However, the results typically follow around three months on from the previous set, so it is reasonable to expect Nvidia’s next earnings release to occur in late May.

Nvidia’s results for Q1 of its 2026 financial year were released on 28 May 2025.

In 2024, Jared Isaacman became the first non-professional astronaut to walk in space. Within months, the daring payments billionaire – a close ally of Elon Musk – leapt closer to another personal goal by becoming Donald Trump’s top pick to head US space agency NASA. He was briefly out of favour when Trump and Musk fell out, but the stars have realigned for Isaacman. Trump has renominated Isaacman, saying he’s the ideal candidate to drive the agency’s “mission of discovery and inspiration”.

Within NASA, there are hopes that the appointment will draw a line under “weeks of drama” over who will lead the agency, says Bloomberg. Isaacman, 42 – who founded his company Shift4 at just 16 – is a political neophyte. But Trump highlighted his business achievements; and there’s no doubting his passion for extraterrestrial travel and derring-do, says Time. A former stunt pilot, he bankrolled last year’s three-day Polaris Dawn space mission, reportedly paying $200 million to Musk for all four seats aboard the SpaceX craft. Isaacman has tied himself closely to SpaceX since 2021, says Bloomberg, spending undisclosed sums on multiple missions and helping fund research and development. “A staunch supporter of the commercial space industry,” he’s expected to increase NASA’s use of private companies if confirmed for the top job. Conflict of interest is a worry.

“Dropping out of high school isn’t usually a good idea, but it sure paid off for one New Jersey kid,” noted a 2011 profile in Business Jet Traveler charting Isaacman’s meteoric rise. His parents, who earned a precarious living, worried when the self-described “horrible student” quit school, but Isaacman already had a business plan. During school holidays, he’d done IT work for Merchant Services Inc – “early e-commerce stuff” – and got a feel for the credit-card industry where he saw “a lot of opportunity for improvement”. In 1999, he founded United Bank Card from his parents’ basement: “Assets were limited to $10,000 in stock certificates that he’d received from his grandfather.”

The young firm flourished. Isaacman’s father, Don, who joined as a salesman, later said “he was within a year of losing his house” when the company (rebranded Shift4 in 2017) started, crediting his offspring with “saving the family”. There was no silver bullet, says Isaacman: no “one technology or patent”. He simply focused on streamlining the then labyrinthine business of processing credit cards, moving quickly into new technologies and often offering customers (typically restaurants and shops) free kit in order to win their accounts. Within a few years, the firm made Inc magazine’s annual list of America’s fastest-growing small businesses and Isaacman was runner-up to Mark Zuckerberg in the list of “30 top entrepreneurs under 30”. By 2011, he was running one of the US’s largest payment processors.

Can Jared Isaacman lead NASA?

Success gave Isaacman free rein to indulge his passion for flying. An avid collector of vintage planes, he became an aerobatics whizz, performing at air-shows. In 2009, says Fortune, he “set a world record for circumnavigating the globe”. Isaacman parlayed his love of aviation into a business, founding Draken International, a defence firm specialising in military aircraft and training pilots. In 2019, he sold a majority stake to Blackstone, launching himself into billionaire status. Isaacman is “a thrill seeker”, says Forbes. But that’s partly “to unwind from the non-stop… 80-plus-hour weeks” he works. NASA's staff can expect an intense regime of slashed meetings, cost-cutting and liberation from “inefficiencies”. Isaacman has said he wants to “foster a culture of urgent execution” in his quest to kick-start America’s new space age. “NASA’s Game of Thrones is finally over,” observed Politico. There’s quite a firebrand in the hotseat.

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The combined market capitalisation of the Magnificent Seven group of US mega-cap stocks – Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla – is now over $22 trillion, meaning these seven stocks make up about 37% of the S&P 500 and 23% of the MSCI World index. As a result, most investors are likely to be heavily invested in this handful of tech giants, which has worked well for the past five years. However, with the market looking increasingly frothy, it could be time to take some money off the table.

Mega-cap tech has sucked up capital at the expense of other businesses, meaning there are now some exciting opportunities appearing in corners of the market. STS Global Income & Growth Trust (LSE: STS) is one way to invest in these kinds of cheaper stocks and reduce exposure to more frothy areas of the market.

STS Global Income & Growth offers quality income

STS holds a fairly concentrated portfolio of between 28 and 34 names, selected for their predictability, resilience, quality and income potential. The strategy emphasises firms that have scope for persistent earnings and dividend growth, which should result in reduced volatility, say James Harries and Tomasz Boniek of Troy Asset Management, who have run it since early 2020. The same duo also run the Troy Global Income Strategy with a similar mandate, which has delivered an annualised volatility of 9.1% since its launch in 2016, compared with 11.2% for the MSCI World index.

The top holdings today are British American Tobacco (BATS) and CME Group. BATS offers the “unusual combination” of a high-quality business trading at an attractive valuation, says Harries. CME, the operator of the world’s largest futures and options exchange, is a high-quality firm that offers a 4% yield comprised of regular and special dividends. More recently, the managers have added Nike, purchasing it at a low point when it was “out of favour” due to strategic missteps and tariff trouble. The shares had fallen 71% from peak to trough, making it a classic quality value play.

The trust has a 33% weighting to the UK, an opportunistic allocation as “global investors have shunned the UK”. However, on a look-through, only 6% of sales come from this market. “So we’re not making a call on the UK economy at all, what we are doing is saying that we’re taking advantage of attractively valued global assets listed in the UK.”

STS Global Income & Growth: avoiding technology

Technology is just 10% of the portfolio – a conscious decision, as most tech companies don’t pay a dividend. However, the result is that STS has underperformed the market in recent years, with a net asset value (NAV) return of 36.3% versus 49.3% for its benchmark, the Lipper Equity Global Income index. Yet while the rest of the market is starting to look pricy, STS’s portfolio is anything but expensive. At the end of October, the trust’s holdings were trading at an average price-to-earnings (p/e) ratio of 18 compared with an average of 21 for the MSCI World. The estimated yield was 3% compared with the market’s 2%.

What’s more, Harries and Boniek have been able to fill the portfolio with quality names at low prices. The portfolio has an overall operating margin of 28% (compared with 14% for the market) and a return on capital of 16% (compared with 9% for the market). Quality names in the portfolio trading close to or at the bottom of the ten-year p/e range include the likes of Reckitt, Novartis, Roche, Unilever, Nestlé and Accenture.

Buying at “lower valuations means less volatility”, says Harries. With so many high-quality companies currently “out of favour for whatever reason”, the team has been able to “build asymmetry into the portfolio”. This means aiming for “limited downside and long-term decent upside”.

In a market that’s starting to look overexcited and overextended, STS offers an alternative for investors seeking quality, value and income. The trust is currently trading at a small discount to NAV and offers a dividend yield of around 3.5%.

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Questions about AI’s stock market dominance are being asked louder than ever. On 27 October, Wired published an article contending that “AI may not simply be ‘a bubble’ or even an enormous bubble. It may be the ultimate bubble.” The article included comments from Brent Goldfarb, co-author of Bubbles and Crashes: The Boom and Bust of Technological Innovation. Goldfarb said that the AI boom ticks every box he looks for in a technology-driven bubble: uncertainty over the ultimate end use, a focus on “pure play” companies, novice investor participation and a reliance on narrative.

As Edward Chancellor, financial journalist and former hedge-fund strategist, has pointed out in these pages, the AI bubble is also on shakier ground than many previous technology-driven bubbles, such as the dotcom bubble, the “Roaring Twenties” and the US railroad boom, all of which were followed by major economic depressions. It is also more speculative. Railways, cars and the internet were proven technologies in their bubble periods – the same cannot be said of self-teaching computers. The AI bubble is more “a multi-trillion-dollar experiment” to see if we can arrive at artificial general intelligence (AGI) – technology that successfully matches human levels of intelligence. If that experiment fails, we won’t have canals, railways or fibre-optic cables to show for it, but rather millions of obsolescing computer chips and dormant, debt-funded data centres.

AI as a field of research dates back at least to Alan Turing, and includes established fields such as machine learning and computer vision; generative AI is a newer subdivision that has taken shape over the last 15 years. It leapt to public attention – and brought the wider field along with it – with the launch of ChatGPT in November 2022. But it’s worth emphasising that if you are happy to buy Nvidia shares at current prices, you are effectively betting on the long-term profitability of generative (and its newer subset, “agentic”) AI, not the field as a whole. And even the bulls are nervous about the prospects for that. “AI... is driving trillions in spending over the next few years and thus will keep this tech bull market alive for at least another two years,” says Dan Ives, head of global technology research at Wedbush Securities. That is significant as Ives is one of the great tech bulls. If even he is implicitly conceding that the current bull market could end and suggesting a possible timeframe, it shows that doubt is creeping in.

The nature of the AI bubble

“This time it’s different” is regarded as one of the most dangerous phrases in investing, but it’s a refrain that AI’s proponents turn to increasingly frequently. The companies driving AI today, they say, are highly profitable, unlike the proliferation of profitless internet start-ups in the dotcom era. That holds true of Nvidia as well as the “hyperscalers” (Alphabet, Amazon and Microsoft), but none of these are profitable because of revenue generated by generative AI products. They were already highly profitable (and, for the most part, less capital-intensive) before the arrival of ChatGPT. No one denies there is money to be made selling computer chips or cloud computing. But AI is a different story.

Step back and look at generative AI firms in isolation, and the current set-up looks a lot like the dotcom bubble. Venture capital is flooding into speculative businesses that burn through cash with no credible plans to turn that into profit any time soon. James Mackintosh of The Wall Street Journal observes that the dotcom bubble kept inflating between 1995-2000 despite media references to the bubble increasing every year throughout this period. Bubbles can keep growing, even if everyone knows they’re bubbles.

A bubble usually bursts after encountering some form of pin. No one knows what that will be for AI, but a contender is an energy-driven inflation crisis. AI requires vast amounts of energy. Policymakers can make life as easy as possible for AI developers, but they can’t control energy prices. The more advanced AI models become and the more users they acquire, the more energy they are likely to consume. And there are signs that AI is already making energy more expensive for US consumers. Bank of America deposit data shows that average electricity and gas payments increased 3.6% year-on-year in the third quarter of this year. Whether or not energy-driven inflation reaches a point where it poses headaches for US politicians, it doesn’t take much imagination to see it quickly becoming a problem for AI developers themselves.

OpenAI’s CEO Sam Altman wants his firm to have 250 gigawatts (GW) of data-centre capacity by 2033. According to Bloomberg’s Liam Denning, that’s equivalent to about a third of peak demand on the US grid and more than four times all-time peak electricity demand for the state of California. Nvidia’s CEO Jensen Huang says 1GW of data-centre capacity costs $50 -billion - $60 billion to build (of which $35 billion or so goes on Nvidia’s chips), so building this could cost OpenAI north of $12 trillion. That simply it isn’t going to happen – certainly not in anything like the next eight years, at least – but the numbers show just how much energy AI’s biggest players are planning to consume.

Even with energy prices where they are, the economics are stretched thin for AI developers. OpenAI posted an operating loss of $7.8 billion in the first half of 2025, according to tech news site The Information. Annual recurring revenue is set to exceed $20 billion this year, but OpenAI’s own projections say it will not be cash flow positive until 2029, when it projects revenue of $125 billion. If the economics of scaling its capacity at pace ever start looking negative, then OpenAI’s semiconductor-spending binge could slow dramatically.

If you want an idea of how overblown the stock market’s reaction is to this binge, look no further than AMD (Nasdaq: AMD). On 6 October, OpenAI announced that it would buy up to 6GW of GPUs from AMD, which AMD executives estimated could net $100 billion in additional revenues once the ripple effects are factored in. Within two days of the announcement, AMD’s market capitalisation had increased by around $115 billion – more than the revenue the deal was expected to raise. That’s before getting into the fact that AMD will be paid for the GPUs not with money, but with its own stock.

Where are the benefits of AI?

Generative AI does at appear to be improving professional productivity. What data we currently have available from the US shows a trend of reasonably healthy GDP growth alongside subdued job creation, which Joseph Amato, president and chief investment officer at Neuberger, calls “an unusual combination that points to productivity doing more of the heavy lifting”. AI is expected to lift productivity in the US by 1.5% over the next ten years, and between 0.2%-1.3% across the G7. But Amato cautions that these gains are far from evenly distributed and that they pose risks of their own. “Lower-end white-collar roles – performing routine analysis or administrative tasks often filled by recent college graduates – face significant displacement risk,” he says. That has profound policy implications.

The AI revolution could eat itself. You can’t put an entire generation of the global middle class out of work without expecting substantial economic consequences; perhaps enough to negate all the potential GDP gains. There is evidence that this is already happening. Ron Hetrick, principal economist at workforce consulting firm Lightcast, observes that average real spending on retail goods compared with total employment has been stagnating ever since the housing bubble that led to the 2008 crash. Covid and the consequent stimuli disrupted this trend, but only temporarily: retail spend per employee is now falling again.

Hetrick calls AI “a jobs-destroying, money devouring technology” that threatens to accelerate this decline. As retail spending continues to fall, AI companies’ “large enterprise clients will also see their buyers stagnate”. If the world entered a recession, the core business pillars at Amazon, Google and Meta would take a major hit; advertising and e-commerce revenues are all ultimately reliant on a large crop of middle class consumers happily spending money. None of these companies has an AI division that is remotely profitable in its own right, let alone capable of supporting the wider business.

AI could deliver some genuinely world-changing social benefits, improved medical research being an obvious example. Google DeepMind’s AlphaFold is a program that can predict the structure of a protein based on the sequence of amino acids that comprise it, which has profound implications for the research of diseases and development of treatments.

But two things need to be remembered: firstly, this isn’t particularly new: DeepMind debuted AlphaFold in 2018, so its potential ought to have been priced in before ChatGPT came along. These kinds of techniques are also not generative AI – researchers at the top biotechs are not asking ChatGPT to come up with new amino acid sequences for them, because that’s not how large language models work. More pertinently for investors, it is not a given that the medical applications will be profitable.

How to hedge your bets with AI

How can investors hedge their bets given these trends? Judicious selection of energy stocks is one way to play the increasing demand for power that AI companies will drive over the coming years. But this window may already have passed: Vistra (NYSE: VST), for example, has gained 60% in the past 12 months and now trades at 22 times forward earnings – which is a reasonable price for a tech stock, but looks steep based on traditional valuations for utilities. That said, if it does turn out to be energy inflation that eventually bursts the AI bubble, then the suppliers ought to catch the tailwinds in the process. An investment trust with exposure to companies powering and building data centres, such as Pantheon Infrastructure (LSE: PINT), can offer exposure to data-centre energy suppliers.

Or you could look for undervalued AI plays. Certain semiconductor stocks, such Taiwan Semiconductor Manufacturing Company (NYSE: TSM), stand to continue benefitting from AI infrastructure spending for as long as it takes the bubble to burst, without the overblown valuations of the big US names.

Given TSMC’s effective monopoly on high-end chip manufacturing, it is well-placed to capitalise on whatever technological innovation might follow in AI’s wake if and when the bubble bursts.

Chris Beauchamp, chief market analyst at IG, suggests some traditional defensive plays in order to hedge portfolios, including gold, government bonds, defensive shares in sectors such as consumer staples and healthcare, and multi-asset funds. “Finally, with policy rates still elevated, holding cash-like assets is no longer punitive,” he says. “The key is diversification: no single hedge works in every scenario, but a combination can cushion portfolios if AI euphoria fades.”

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

1. The demise of the smartphone

It is hard to imagine life without them. There are 7.4 billion smartphones in the world and the typical user checks them 144 times a day. And yet, 50 years ago we would have said the same of cigarettes. Everyone smoked in cinemas, on trains and, though it seems unimaginable now, on aeroplanes. Once it was clearly shown that smoking was very bad for your health, it went into steady decline. We are just starting to work out just how bad smartphones are for our mental health. There is a growing body of evidence to show they have a negative impact on cognitive ability, memory, attention and sleep, and create addiction and anxiety. That’s just for adults. The impact on teenagers is worse. There are already moves to put age restrictions on usage, and those may get tighter. Over the next decade, people will give up on the smartphone, taking down one of the biggest industries in the world – and with it the app economy.

2. The robo-economy takes off

Despite all the hype, it will become painfully clear during the 2030s that the AI revolution was oversold. The chatbots don’t actually possess any intelligence and, apart from a few very limited tasks, can’t replace human work. Instead, it is robotics that will prove to be the next great wave of technological innovation. Domestic robots will be the biggest growth industry of the 2030s and 2040s, with smart machines performing dozens of small, dull tasks around the home, from mowing the lawn to cooking meals. People will be more than happy to pay for genuinely labour-saving devices, turning robots into a huge industry.

3. The Indonesian miracle

Lots of attention will be devoted to the contest between China and India to become the largest country in the world measured by population, and the only serious rival to the US as the biggest economy. But it is Indonesia that will really be rising up the rankings. By 2050 it will have a population of 321 million and will still be growing strongly (China will be in steep demographic decline by then). Add in a 5% annual growth rate, the annual average rate for the last quarter century, and by the 2040s Indonesia will have established itself as one of the major global economies. The Jakarta stock market will be home to the fastest-growing new companies.

4. A global stock market emerges

The competition between rival financial centres consumes a huge amount of attention. The decline of London, the rise of the US and the emergence of the Gulf bourses worries finance ministers, and companies have to decide where to list their shares. By 2050 a lot of that will seem irrelevant. Even in 2025 it seems surprising that we still have national stock markets. Technology means that we can trade any bond or equity anywhere in the world at any time of day. Over the next 25 years a single global stock market will emerge, hosted on the cloud, with settlement in a universally recognised crypto currency that is accepted everywhere. National stock markets will turn into a relic of interest only to a handful of financial historians.

5. A British revival

When we look back from 2050, it will seem that today’s problems were surprisingly easy to fix. A bond-market collapse late in the 2020s as the country’s debts spiral out of control will prove traumatic and will be followed by a chaotic series of coalitions as the party system fragments. But by the middle of the 2030s, a technocratic government imposed by the IMF, and led by a surprisingly youthful-looking Tony Blair, will start to get the country back on track. Two big changes will make a huge difference. Allowing fracking will enable the country to become the Saudi Arabia of Europe. That will make a corporation tax at Irish levels affordable and trigger a huge wave of inward investment. And switching to a Dutch-German-style social-insurance system for healthcare to replace the NHS will transform the 12% of GDP spent on the medical system. With those two reforms in place, Britain will start to boom again, just as it did under Mrs Thatcher in the 1980s.

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