From the studio

From the studio
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վ:CIO Monthly – Kiran Ganesh on the AI rally and navigating market highs(3 min)

Thought of the day

NVIDIA releases its earnings today in a closely watched event for both the firm and the broader tech sector. Investors are focused on updates around the next-generation Blackwell chip, and whether NVIDIA can once again surpass already high expectations for revenue and guidance. The company’s comments on the outlook for renewed China AI sales will also be key, offering a fresh perspective on the evolving US-China chip landscape and what may lie ahead for the industry.

While the tech-heavy Nasdaq index has risen over 40% from its 8 April low, momentum for the trade has slowed over the past two weeks.

Without taking any single company views, we expect the results to be another key driver for tech sentiment ahead:

The outlook for large-cap tech remains compelling. Second-quarter earnings for big tech have been robust and broad-based, with most companies beating both sales and earnings per share (EPS) estimates for the second quarter. Forward guidance has also held up, and cloud revenues at the largest platforms grew by more than 25% year over year in the June quarter. Our 2025 S&P 500 EPS estimate stands at USD 265, implying 6% growth, with the potential for further upward revisions.

AI compute remains a key driver of growth. Semiconductors have outperformed software in recent months, sparking debate over whether AI is shifting value away from software and toward semis. While some argue that agentic AI (autonomous systems capable of completing tasks) could disrupt software-as-a-service (SaaS) companies, we believe this narrative may be premature. We believe SaaS firms remain well positioned to integrate AI into their platforms and drive growth. Any indications from earnings on the strength of AI compute infrastructure demand will be closely watched.

AI-driven automation offers substantial growth potential. If roughly one-third of tasks in the global economy can be automated, with a labor share of 50% and AI vendors capturing 10% of the value, the annual AI revenue opportunity could reach USD 1.5 trillion. This compares to cumulative global AI capex of USD 780 billion from 2022 to the end of this year, illustrating the scale of the opportunity as monetization accelerates. Thus, technology companies are well placed to earn attractive returns on these investments over time, in our view.

So, we retain our constructive long-term view on AI and the broader technology sector. However, we like seeking a more balanced exposure across the AI value chain, with a preference now for laggards that offer a more attractive risk-reward trade-off. Structured investments, such as capital preservation and put-writing strategies, may help investors take advantage of near-term volatility.