Equity outlook: Where are the investment opportunities beyond big tech and AI?
AI has dominated markets for the past few years, but investors can still gain exposure without directly investing in AI stocks.
Technology giants with an edge in artificial intelligence (AI) have dominated equity market returns in recent years, but enthusiasm is slowing down with chip stocks looking jittery as competition heats up.
There have also been warnings of a potential AI bubble, but as yet, the jury remains out over which companies will emerge the longer-term winners or losers. A recent survey by fund management group Natixis Investment Managers revealed that despite a number of global headwinds – ongoing US-Iran conflict, volatile energy markets and persistent inflation – 91% of the 33 strategists interviewed were optimistic that AI will be a driving force behind market performance in the second half of the year. It also found 88% expect the AI sector to accelerate with just 12% believing its bubble will burst in the second half of the year.
But should investors be seeing that disruption as an opportunity?
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How to invest in AI beyond ‘big tech’
There are two distinct strategies the AI wave opens up. One is to aim to capture the growth potential of AI but without limiting yourself to the big names, such as the ‘Magnificent 7’ – Apple (NASDAQ:AAPL), Microsoft, Amazon, Alphabet (NASDAQ:GOOGL), Meta, Nvidia (NASDAQ:NVDA) and Tesla.
BlackRock’s Helen Jewell, international chief investment officer of fundamental equities, believes by looking at the AI story through a wider lens, investors could discover more upside with less of the volatility that comes with high valuations and market concentration.
One route is to look at infrastructure and the power investment needed to facilitate the AI boom and the broader shift towards electrification it has helped accelerate. Jewell said this trend is being “turbocharged” by governments focusing on energy independence.
“These sectors may offer exposure to structural growth trends while potentially providing more diversified return streams, attractive valuations and lower concentration risk than some of the most highly valued areas of the market,” she added.
Where are the next big opportunities in global equities?
In 2025, a handful of sectors led market gains – namely banks, aerospace and defence, and industrials.
All three areas are expected to continue to perform positively, as valuations are increasing. European banks in particular look promising; BlackRock's Jewell said they’ve shown resilient earnings despite interest rates calming down from recent highs.
She added that banks are increasingly adopting AI to modernise their own systems. Better integration across the European banking and capital markets system, alongside consolidation indicates a more profitable sector and, therefore, better likely returns for shareholders.
How to invest in contrast to AI
Another way to play the AI theme is in reverse. Concentration risk presents a problem if too high a share of your overall investments are gathered in one stock, region or sector – hence the ‘don’t have all your eggs in one basket’ analogy.
If there’s a correction in AI, and share prices fall (or the supposed bubble bursts), being exposed to different areas of the market that aren’t correlated will offer investors a degree of ballast to their portfolio.
Jewell cited healthcare as a strong diversification play, though it is also a sector that can benfit from AI. The sector has historically traded at a premium to the market but is now at a 15% discount, with earnings growth that has been second only to technology.
Elsewhere, she likes Latin America, which also has a low correlation to the AI trade. It’s trading at lower valuations than historical average, and while it makes up just 0.8% of the MSCI All Country World Index (ACWI), it accounts for 7% of global GDP.
In the UK, the FTSE 100 index has outperformed global stocks on a total return basis, without any direct AI exposure. Broadly, rising interest rates over the past five years and higher energy prices have boosted banks and oil companies, while defence has also returned to prominence amid the ongoing conflicts around the world.
