Looking Beyond the AI Hype

Artificial intelligence (AI) continues to captivate markets—and for good reason. The next wave of innovation extends beyond today’s generative AI models, with ambitions to develop autonomous systems capable of executing real-world tasks, advanced robotics and increasingly sophisticated multisource models.

Behind the scenes, this transformation demands extraordinary investment. The technology companies driving large-scale AI deployment—often referred to as hyperscalers—are committing unprecedented and increasing amounts of capital toward data centers, computing power and digital infrastructure. Reflecting this broader trend, capital expenditure (capex) among hyperscalers is projected to accumulate to roughly $400 billion by 2025 year-end.¹

But the AI expansion extends far beyond headline names. A wide network of suppliers supports this transformation, including semiconductor and chip manufacturers, energy providers, cloud infrastructure operators and data storage firms. Each plays a distinct role in enabling AI at scale, contributing to idiosyncratic performance across AI-related companies.

Some companies already have backbone infrastructure in place. Others are in heavy investment mode, taking on significant costs before profitability becomes clear. Meanwhile, critical upstream providers are benefiting from current demand from today’s rapid adoption of AI. This dispersion highlights the many layers beneath the surface, as companies across the ecosystem face differing opportunities and challenges. At the same time, market enthusiasm may at times be influenced by narrative rather than fundamentals, leading to uneven pricing across companies with varying roles in the AI value chain.

As the AI landscape develops, clear winners and losers are likely to emerge. With AI-related companies representing a meaningful share of major equity indexes, investors must look beyond the hype to understand company-specific drivers. Skilled active managers’ selective approach may help investors assess which companies may be better positioned to navigate the opportunities and risks of a rapidly evolving technological landscape.