As artificial intelligence capital expenditure continues to surge, a roughly $19 billion fund at Pacific Investment Management Co. (PIMCO) is shifting its focus away from richly valued U.S. tech giants toward Asian semiconductor and data-center infrastructure companies. Fund manager Emmanuel Sharef argues that Asian assets offer lower valuations, stronger earnings growth, and more direct exposure to data-center construction\u2014making these “pick-and-shovel” suppliers the likely true winners of the next AI cycle.<\/p>\n
Sharef is currently underweight most hyperscale cloud providers and Magnificent Seven members. He points out that relentless AI capex is pushing up debt burdens at these companies, squeezing free cash flow, and introducing credit risk\u2014placing further pressure on their already elevated valuations.<\/p>\n
“You don’t necessarily need to own the most expensive stocks to capture a particular theme or market trend,” Sharef said. The fund has outperformed 97% of peers over the past three years.<\/p>\n
The fund manager places greater emphasis on the transmission of AI capex through the supply chain. As data centers continue to expand, semiconductor components, cooling equipment, cabling, optical devices, power supplies, construction machinery, and metal materials will all see incremental demand. Based on this thesis, the fund aggressively bought Samsung Electronics, SK Hynix, and TSMC last year, with roughly 60% of its equity allocation now concentrated in these names.<\/p>\n
Sharef believes the AI trade is broadening from U.S. tech giants into the supply chain. As AI capex continues to tilt toward data centers, chips, and infrastructure, the real beneficiaries may not be limited to the most closely watched tech giants\u2014Asia’s “pick-and-shovel” plays could emerge as the next winners.<\/p>\n
The dual advantage of valuation and earnings<\/p>\n
Sharef’s investment logic rests on a core conviction: returns from AI infrastructure investment are migrating from end-user applications upstream into the industrial supply chain. U.S. tech giants may still be the protagonists of the AI race, but their ballooning capital expenditure has begun to erode financial health.<\/p>\n
By contrast, Asian semiconductor manufacturing and infrastructure companies face a fundamentally different situation. These firms are both direct suppliers to AI data-center construction and beneficiaries of relatively reasonable valuation levels. Take TSMC, for example: as the world’s most advanced chip foundry, it holds a near-monopoly on AI accelerator manufacturing, yet its price-to-earnings ratio is far lower than most U.S. tech giants. SK Hynix similarly holds a leading position in high-bandwidth memory (HBM), while Samsung Electronics spans memory chips, foundry services, and end-user devices.<\/p>\n
Sharef’s portfolio repositioning is hardly an isolated case. As AI capex tilts from software and services toward hardware infrastructure, a growing number of institutional investors are reassessing the value of Asian supply-chain companies.<\/p>\n
The transmission path of AI capex<\/p>\n
AI infrastructure buildout is forming a complete industrial-chain transmission mechanism. Large-scale data-center construction first drives demand for semiconductor components\u2014GPUs, CPUs, memory chips, and networking chips. Then, heat dissipation challenges spur demand for cooling equipment; data transmission needs drive orders for optical modules and cabling; and power-supply bottlenecks benefit providers of power equipment and grid infrastructure.<\/p>\n
Sharef specifically notes that construction machinery and metal materials will also benefit from this buildout cycle. This means the impact of AI investment extends well beyond the technology sector itself, reaching into traditional industrial and raw-materials segments.<\/p>\n
This transmission logic echoes the classic “selling shovels during a gold rush” investment strategy. In the AI gold rush, rather than betting on which tech giant will ultimately prevail, it may be wiser to invest in the companies that supply essential infrastructure to all participants.<\/p>\n
Market implications and investment takeaways<\/p>\n
PIMCO’s repositioning sends a clear signal: institutional investors’ tolerance for U.S. tech-giant valuations is declining. When AI capex shifts from being a growth driver to a financial burden, the market’s pricing logic for these companies will shift accordingly.<\/p>\n
For investors, the appeal of Asian semiconductor and infrastructure companies lies in their “dual-benefit” profile\u2014they enjoy demand growth from the AI buildout cycle without bearing the same level of valuation risk as tech giants.<\/p>\n
That said, the strategy is not without risks. Asian supply-chain companies also face geopolitical uncertainty, cyclical industry fluctuations, and technology-roadmap shifts. The capital-intensive nature of the semiconductor industry means that if the pace of AI investment slows, earnings at these companies could be materially affected.<\/p>\n
Sharef’s perspective offers an important lens for the market: in the next phase of AI investing, the real excess returns may come from mid-stream supply-chain companies that have been relatively overlooked\u2014not the tech giants in the spotlight.<\/p>\n","protected":false},"excerpt":{"rendered":"As artificial intelligence capital expenditure continues to surge, a roughly $19 billion fund at Pacific Investment Management Co.…\n","protected":false},"author":2,"featured_media":144082,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[18],"tags":[28254,3882,73138,23230,73137,127,276,275,3246],"class_list":["post-144081","post","type-post","status-publish","format-standard","has-post-thumbnail","category-samsung-electronics","tag-ai-capex","tag-data-centers","tag-emmanuel-sharef","tag-magnificent-seven","tag-pimco","tag-samsung","tag-samsung-electronics","tag-sk-hynix","tag-tsmc"],"_links":{"self":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts\/144081","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/comments?post=144081"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts\/144081\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/media\/144082"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/media?parent=144081"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/categories?post=144081"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/tags?post=144081"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}