Value’s Turn Amid the AI Boom?
CIO, Multi-Asset Strategies and Solutions
Artificial intelligence (AI) is driving a surge in infrastructure spending. Today’s hyperscalers are racing to build data centers and compute capacity, pushing capital expenditures (capex) sharply higher to unsustainable levels. While the market has rewarded these capex leaders, history suggests that as capital cycles mature and spending stabilizes, market leadership often shifts.
In past cycles, growth stocks thrived during investment booms but faltered when spending slowed. Value stocks, by contrast, lagged during these booms but outperformed after capital intensity peaked and returns normalized. Heavy investment often squeezes margins and fuels speculative excess, creating opportunities for companies with strong cash flows and disciplined balance sheets.
The takeaway is clear: While AI represents a transformative technology, the capital cycle is not infinite. As enthusiasm cools and spending rolls over, value-oriented strategies may regain leadership. Positioning for this shift means focusing on fundamentals rather than chasing momentum. For asset allocation teams, it’s important to recognize that the AI revolution is real, but that doesn’t mean every capex grower will win. History shows that value often perform better as the market works through periods of excess growth.
Julia Rozenfeld contributed to this article.