Weekly Buzz: Investing in AI, beyond the usual suspects

The biggest winners of the AI boom so far have been the firms building it: the chipmakers, cloud providers, and Big Tech. However AI's influence is now spreading beyond that group, with some of its most meaningful impact showing up outside tech.

What’s going on here?

Tech giants are set to spend roughly US$630 billion on AI this year, and a lot of that money will go towards physical construction. Think power grids, cooling systems, and industrial equipment. For every company building an AI model, there are the firms pouring the concrete, upgrading the grids, and wiring the facilities that the model runs on.

Then there's how AI is actually being used. Across industries, companies are deploying AI to boost productivity, cut costs, and lift margins. Block announced last week that it's cutting about 40% of its staff as it leans into AI-powered automation. It's part of a broader pattern, with firms like Amazon tying recent job cuts to AI.

These are second-order effects. Whether it's the firms constructing the physical backbone of AI, or the ones using it to run leaner operations, the opportunity set is expanding towards companies where AI also shows up in earnings, not just marketing.

What’s the takeaway for investors?

The avenues for growth that AI creates now stretch across the industrial and energy companies building the infrastructure, and sectors like healthcare, where the technology is accelerating research efforts and changing how companies operate.

When one big theme drives markets, the spotlight tends to stay fixed on the most visible names. The opportunities forming outside it, where AI's impact is no less real, will be worth paying attention to as well.

(If you want an easy way of investing in any of these sectors, check out Flexible Portfolios.)

This article was written in collaboration with Finimize.

In Other News: What markets are saying about the Iran conflict so far

A few days after the US and Israel launched strikes on Iran, markets have had time to react and recalibrate. The conflict is still fluid, but the market response so far has been measured.

The S&P 500 dropped as much as 1.2% on Monday before recovering to close flat. Tuesday saw a sharper selloff, with the Dow falling 400 points. By Wednesday, the S&P 500 had recovered most of its earlier losses, gaining 0.8%.

Oil remains a key variable: Brent crude spiked above US$83 per barrel before settling back to around US$80 by Wednesday. President Trump moved to reassure markets by offering insurance to shipping lines operating in the Persian Gulf, and signalled that the US Navy could escort tankers through the Strait of Hormuz.

The bigger driver behind the rebound was fresh economic data. The services sector, which makes up roughly two-thirds of US economic output, expanded at its fastest pace since July 2022 in February. Private sector hiring also beat expectations, with 63,000 positions added, a sharp improvement from a revised 11,000 in January. A steady jobs market gives a floor to consumer spending, which is the engine that keeps the economy moving.

Amid volatility, remember that markets don't move on headlines alone. They move on what those headlines mean for fundamentals like corporate earnings and consumer spending. A portfolio that’s diversified across regions and asset classes is built to weather events like this: while equities dipped early in the week, gold and bonds provided a buffer.

(For our earlier update on the conflict and what it means for your portfolio, read here.)