Key takeaways:
- Artificial Intelligence’s (AI) rapid growth has fuelled both opportunity and disruption across financial markets, extending well beyond tech into infrastructure, chipmakers and utilities.
- Business adoption, productivity gains, and real profit growth are driving investor interest in AI.
- Environmental concerns around AI's energy and water use remain a genuine consideration, balanced against its innovation in fields like healthcare.
- We maintain balanced AI exposure — holding companies that profit directly from AI, those that benefit further down the supply chain, and more defensive positions — ensuring they remain well positioned as AI technology develops.
- Our long-term outlook on AI remains broadly positive, while staying alert to the fast-moving risks involved.
AI investing has quickly become one of the biggest themes in financial markets — but how much of it is substance, and how much is hype?
For many people, AI has quickly become an integral part of everyday life.
This is particularly true for businesses, with AI reshaping how they spend, compete, and operate — something that has fuelled both growth and disruption for financial markets.
Regardless of your personal views on AI, the technology’s pace of change has, undoubtedly, been blistering.
We saw a notable example of this in April, when US shoemaker, Allbirds, abandoned its footwear business entirely, pivoting to AI infrastructure.
The response? Its share price jumped 600% in a single day.
Earlier this year, two-thirds of America's largest companies mentioned AI in their earnings updates. Those that did saw their share prices rise nearly five times higher than those that didn’t.
There is no doubt AI has become a defining moment for investors; but when a theme becomes this widespread, separating reality from hype becomes critical.
To help us achieve this, here are some of the key AI-related questions our experts are asking when managing your Investment Plans.
What constitutes an AI company?
AI now extends well beyond one sector.
Alongside technology companies, there are infrastructure firms building data centres, manufacturers supplying crucial chip components, and utility companies providing energy to power them, to name a few.
Directly or indirectly, AI now touches most industries, which spreads both opportunity and risk across different parts of financial markets.
Why are investors so excited about AI?
Business Adoption
The number of companies using AI continues to expand, with more than half of US businesses now actively spending on it[1]. Growing demand increases the likelihood that AI is here to stay.
Productivity Gains
These businesses are paying for AI because they believe it delivers. Faster decisions, lower costs, and greater efficiency are just a few advantages already being seen.
Soaring Profits
AI-focused companies like Microsoft have repeatedly announced growing profits, beating investor expectations. This is a key difference to previous bubbles, where markets were driven purely by excitement rather than sales.
Where could the AI story go wrong?
Spending Surge
Despite their strong profits, big tech companies are also investing record amounts in AI — but increasingly turning to borrowing to fund it. Some also question whether this spending is circular, with these companies effectively supporting one another.
Lofty Prices
Markets across the world have reached record highs on AI optimism. With so much money being invested in AI, investors expect to see returns; any disappointment could hit share prices hard.
Pricing Pressure
The cost of using AI has fallen from its peak, suggesting that – while businesses are embracing the technology – they’re increasingly switching to cheaper models. This adds pressure to the future revenues of AI companies.
Competition from China
Chinese companies are developing capable AI models at dramatically lower costs, posing an increasing threat to the established players.
What about the Environmental, Social, and Governance (ESG) credentials of AI?
Energy and water consumption of AI data centres is a genuine concern. On the other hand, AI has already contributed to important innovation within industries like health care. Balancing these will not be easy, but we are encouraged that efficiency tends to improve as technology matures.
How do we invest in AI in this environment?
We believe it’s important to remain invested in AI.
We invest in AI directly through targeted exposure to technology shares, as well as indirectly through sectors and regions that stand to gain from its growth.
At the same time, we hold more defensive positions, such as bonds and shares in companies whose profits are less tied to AI. This balance allows us to stay confident in the theme without being overly exposed to it.
What is our long-term outlook for investing in AI?
We remain broadly positive about AI's long-term growth and profitability, while staying mindful of the risks outlined above. The key signals remain supportive overall, but we’re also alert to the fast-moving nature of this landscape.
This is why we monitor the full investment cycle and your Plan’s AI exposure regularly, ensuring it remains well positioned as the theme develops.
Want AI exposure as part of a diversified plan?
Whether you're investing for the long term or want more flexibility, our Stocks and Shares ISA and General Investment Account have you covered. We manage your AI exposure alongside a balanced mix of assets — so you can stay invested in the themes shaping the future, without carrying all the risk yourself.
With investing, your capital is at risk. Please remember the value of your investments can go down as well as up, and you could get back less than invested.
Wealthify does not provide financial advice. Please seek financial advice if you are unsure about investing.
Your tax treatment will depend on your individual circumstances, and it may be subject to change in the future.
References
- RAMP data via Bloomberg as at 31/07/2026
