A large share of Western investment is flowing into AI supply chains and data centre infrastructure
In the US, over 90 percent of growth in early 2025 came from information processing equipment and software
Communications services and information technology are among the best-performing sectors in the S&P 500. Utilities are also rising on expectations of future power demand from data
Valuations are drifting away from earnings realities
Investors are pricing stocks based on optimistic narratives rather than proven execution, echoing patterns seen during previous tech bubbles
Chipmakers are investing in AI firms that, in turn, must purchase their hardware. This circular demand reinforces valuations but builds fragility if growth expectations soften
US market capitalisation now exceeds 200 percent of GDP. More than half of recent gains come from a handful of tech giants
Yet leading firms earn only a fraction of the amounts being invested in AI annually
Governments have less fiscal space than in past crises. If valuations collapse, they may struggle to support big tech. The outcome could include equity wipeouts and stranded assets
AI infrastructure will leave useful assets behind, but the risks are real
Retail investors and resource-constrained governments, especially in developing economies, should avoid exuberance and prioritise prudence