The heatwave has clearly not dampened equity markets’ enthusiasm, with stocks reaching new highs in August thanks to the publication of excellent second-quarter corporate results and relatively reassuring economic data. Despite the tensions observed in long-term yields and the high concentration of equity markets — AI-related stocks account for nearly 19% of the annual gains of Bloomberg’s index of leading global equities — equities are being supported by strong earnings momentum, which is not solely attributable to artificial intelligence and energy. Overall, companies posted 50% profit growth in the second quarter. For the full 2026 financial year, analysts now expect average profit growth of around 30%! This explains why the equity rally’s foundations appear to be broadening beyond the technology sector…
AI winners will extend well beyond semiconductors
Artificial intelligence remains one of the most powerful structural investment themes of the decade. However, value creation is no longer confined to software developers or a handful of iconic technology stocks. The real revolution is increasingly taking place in the infrastructure that enables AI deployment: computing power, advanced semiconductors, electricity networks, energy storage, industrial equipment and data-centre construction. For long-term investors, the key challenge is therefore to broaden the investment universe beyond the technology giants…
Banks look far from done paying shareholders
One of this year’s hottest themes in the stock market has been the crowds of investors chasing the recipients of all the planned spending on new artificial-intelligence (AI) data centres. But some investors are also approaching the AI theme from a different angle: Focusing on stocks of the firms that are helping provide all the funding for the AI buildout. The investment cycle makes big banks an “AI-adjacent sector” and that could provide a key reason for further outperformance.
Solid corporate earnings, relatively reassuring economic data and geopolitical risks considered, rightly or wrongly, as manageable by markets explain why risky assets remain little volatile. However, the tensions observed in long-term yields could eventually disrupt the smooth functioning of equity markets. It should also be remembered that the high concentration of the equity market can amplify gains when market heavyweights outperform, but can also accentuate corrections when market leadership reverses, as has already been observed during recent episodes of equity market volatility. This is why we are maintaining a neutral exposure to equities and continue to favour the market segments that benefit most from the rise of AI and offer the best earnings growth prospects: emerging markets, as well as sectors such as technology and financial services.
To protect portfolios against the stagflationary risk that would result from a prolonged closure of the Strait of Hormuz, we also remain overweight non-fossil energy sources — solar, wind, nuclear and hydrogen — AI-related infrastructure such as data centres and power grids, and the raw materials required for their development.
On the bond market, we continue to focus on high-yield bonds and emerging market debt, where the risk taken is better rewarded, with average yields of around 7% and 6% respectively. Conversely, we remain cautious on government bonds, which continue to be unsettled by rising public spending, widening budget deficits in many countries, and increased competition from the large bond issues of major AI players.
Within the commodities allocation, precious metals continue to provide effective protection against stagflation risks, (geo)political instability, and concerns over unsustainable public debt dynamics. Industrial metals also deserve a place in diversified portfolios, as they are expected to play an increasingly important role in the development of AI-related infrastructure. Some of these metals, such as copper and zinc, are already facing supply shortages due to robust and growing demand
Impact on the investment strategy
From semiconductors and data centres...
... to neoclouds...
... to power generation, transmission and storage...
... and industrial companies
Investment Implications
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