Indosuez Wealth Management suggests that investment in artificial intelligence in the US may still be in its “infancy” despite data from various sources estimating that Uncle Sam has spent a cumulative US$335.3 billion for the three years from 2023 to 2025.
Chief investment officer Alexandre Drabowicz says that it is “fair” to say that it is a “debate” on whether if there is indeed an AI bubble. “There are some concerns about the circularity of money, particularly between OpenAI, Oracle and the hyperscalers,” he says.
However, when comparing the tech investment cycle of the 1990’s to recent years, Drabowicz says that “we are just at the beginning”. Indosuez points out despite "unprecedented" capex, profits and margins are at record levels with low debt at this point in time.
Besides AI investment, capital is also flowing into other sectors with Indosuez highlighting infrastructure and defence as “big winners”. “We are quite still bullish on defense, but not only infrastructure linked to artificial intelligence, but also linked to renewable energy that is needed for data centres,” says Drabowicz.
A diversification trend picked up by Indosuez is the growing optimism for emerging markets, especially to Asia, with Drabowicz saying that alot of global investors have started shifting away to Asia. “It's cheaper, it's less crowded, it's diversified as well,” he adds. “You get different sources of revenues and the ecosystem was probably misunderstood or actually miscalculated by a lot of global investors.”
See also: Asian stocks set to climb after US data lifts mood
Overall, Indosuez is confident in equities overall as they note that the rate-cutting cycle creates a “favourable” environment for equities, supported by strong earnings per share growth. They believe investors should stay invested in the “Goldilocks” economy characterised by sustained global growth, stable inflation and accommodative central banks.
Regarding the hot topic of gold, Indosuez says that some of its analysts are bearish on the precious metal as they believe the ceiling has been reached. They expect central banks to stop buying gold and believe that institutional investors have completed the reweighting of their portfolios and thus ending upside for gold.
Interestingly, Indosuez shared data on how fast gold’s price increased by US$1,000 per troy They point out that gold took 38 years to reach US$1,000 per troy ounce, 12 years to hit US$2,000, five years to hit US$3,000 and only five months to eclipse US$4,000.
See also: Stocks trim early loss, precious metals recover
For Indosuez, gold is also seen as a hedge against a weakening US dollar, with Drabowicz saying that they are “very cautious” on the greenback. For its clients whose home currency is not the US dollar, Indosuez says it hedges their portfolios when buying US equities.
It also says that there are diversification opportunities in private markets, especially on infrastructure and debt.
