Yet that number is forecast to double within five years, creating huge demand for software, components, data centers and cyber security.https://market.us/report/ai-infrastructure-market/#:~:text=Key%20Takeaways,transformation%20efforts%2C%20and%20government%20initiatives Tech spending as a percentage of GDP is forecast to double over the next decade, according to Microsoft CEO Satya Nadella. That adds up to a huge investment opportunity – one that our PBOT fund is designed to take advantage of.
1. AI – the route to attractive investment returns
AI has come a very long way since scientists designed a program to independently play checkers 70 years ago. Generative AI now helps write everything from school essays to complex books, while advances in automation and robotics have transformed factories across the world. For investors, though, the issue is not only what technology might be capable of, but how it can be monetized.
Today, most AI investment is flowing into infrastructure – semiconductors, servers, data centers, networking and storage. The AI infrastructure market is expected to achieve a compound annual growth rate of 28% a year, reaching USD460.5 billion by 2033.Jeffries
Once the infrastructure is built, the next wave of investment will see AI models rolled out into applications. The potential breadth of these applications looks almost limitless. Healthcare (drug discovery and diagnosis), education, art and finance will all be transformed by AI in time. And that, in turn, will fuel demand for new software, hardware and semiconductors – the manufacturers of which are prominent investments in our fund.
It's also worth remembering that AI itself is continuing to evolve. We are now also seeing a growing market for agentic AI, where machines have the agency to independently set goals and execute tasks without human intervention, and for embodied AI, which incorporates the technology into physical systems like robots. The productivity gains and cost savings resulting from these two advances could unlock some USD920 billion of value for S&P 500 companies, according to research from Morgan Stanley.Morgan Stanley (https://www.aol.com/morgan-stanley-sees-ai-productivity-154005748.html)
2. Semiconductors– the power of the chip
Smartphones, computers, cars and even industrial equipment all rely on semiconductors. Companies are racing to make these chips smaller, while increasing computing power and energy efficiency.
We expect the semiconductor market to continue to grow rapidly, driven by the adoption of AI for pre-training, training and inferencing. Generative AI models need graphics processing units (GPUs) to run, as these can optimize the training of large data sets within large language models (LLMs) because of their high-speed parallel processing capabilities.
We also see steady appetite for the more mainstream central processing units (CPUs), which still carry out most computer processing functions, and for memory chips. In all, revenues in the global semiconductor market could reach USD1 trillion by 2030.Applied Materials, 2023.
As most chip production is outsourced, this should lead to substantial growth potential in semiconductor design and manufacturing (in advanced semiconductor factories known as foundries), assembly and testing industries. That in turn means we need more specialized machinery and tools used to make these chips (i.e. semiconductor equipment and semiconductor design software/EDA) and more software designed to run them; the firms that design and manufacture this specialist equipment are among PBOTs key investments.
Source: Pictet Asset Management, 2025; Applied Materials, 2023.
3. Hyperscalers – investing in the cloud
A data-centric world needs a powerful cloud infrastructure provided by large platforms known as hyperscalers. Four of the biggest - Alphabet, Amazon, Meta and Microsoft – are based in the US and represent some 78% of global cloud capacity. Together, they have committed USD390 billion in capital expenditure for 2025.Jeffries
That scale reflects the commercial opportunities that they see from cloud migrations and increasing AI workloads. To date, only about a third of workloads have moved to the cloud, and this proportion is set to grow rapidly.https://www.goldmansachs.com/insights/articles/cloud-revenues-poised-to-reach-2-trillion-by-2030-amid-ai-rollout Technology research firm Gartner expects global public cloud revenue to double to USD1.28 trillion by 2028 across platform, software and infrastructure services.Gartner https://www.gartner.com/en/newsroom/press-releases/2024-11-19-gartner-forecasts-worldwide-public-cloud-end-user-spending-to-total-723-billion-dollars-in-2025
As high-speed connectivity and AI infrastructure have become priorities, multiple US-based cloud hyperscalers are developing custom chips to improve performance and cost, which could be a further catalyst for revenue growth. That’s one of the reasons why they represent potentially attractive tech investments for the long run.
4. Cyber security – protecting our devices
Generic phishing emails with poor spelling are easy to spot. But an authentic-looking message from Human Resources or a realistic voice note can deceive even the most vigilant among us. With the help of AI, cyber-attacks are set to become ever more sophisticated and harder to detect. That presents a big challenge for the cyber security industry – but also a big opportunity for security companies that can harness AI’s power to protect organization and consumers.
The issue is that the data is often stored in many disconnected systems. The “lakehouse” concept aims to bridge the gap between data lakes, where information is stored in its original form, and data warehouses which house processed and structured content. As the lakehouse architecture develops, businesses will benefit from unified data platforms which enable cloud integration, cyber security, analytics, data sharing and AI deployment.
Cyberattacks are already a huge problem: there is a hacker infiltration every 39 seconds, and an estimated 3.8 million records are stolen through breaches every day.https://ung.edu/continuing-education/news-and-media/cybersecurity.php It’s not surprising, therefore, that global spending on cyber security is forecast to grow by nearly 14% a year, according to Gartner.
As AI becomes more ubiquitous, we believe growth in cybersecurity could be even faster in future, with security companies that use the latest tech advances to their advantage likely to benefit the most. We believe investors in tech cannot afford to ignore cybersecurity companies, which is why our portfolio holds stakes in a number of them.
Source: IDC Worldwide Security Spending Guide, Jul. 2024; Gartner Worldwide IT Spending, Oct 2024.
Thematics primer
If you’re reading this, you probably have some - if not most - of your savings invested in stocks. That would make sense. Over the long run, equities tend to generate higher returns than most other investments, albeit with greater risk.
The thing is, though, not all stocks are created equal. Some companies are far more profitable – and much better run – than others. And there are many industries whose best days are behind them.
So the question, then, is how can you get the most from your stock investments?
At Pictet Asset Management, we believe one way to do so is through thematic equity funds.
Thematic investing is not new – we’ve been doing it for more than 30 years.
But it’s quite different from what most investment firms do, and in several important ways.
To begin with, our thematic equity funds don’t invest in every segment of the economy. Instead, they focus on the world’s fastest-growing sectors, dynamic industries such as robotics, clean energy, security and digital technology. That’s where the most attractive long-term investment opportunities are.
And unlike many other funds, our thematic stock portfolios invest mostly in smaller, specialized companies - firms with specific expertise and a clear competitive edge. That’s a deliberate choice. Experience shows specialist firms tend to deliver better returns over the long term than many of the large, diversified firms you’ll find in a stock index such as the S&P 500.
But the differences don’t end there. What also sets our thematic equity funds apart is the type of investment manager that runs them. Most equity portfolios available to investors are managed in one of two ways. Many are run by a generalist investment manager, a jack of all trades who picks stocks from a very long list of analyst recommendations.
Others follow strict rules-based models that leave little or no room for human judgement or skill. Passive funds, also known as index trackers, fall into that category.
Our thematic equity investment managers are quite different. They’re neither generalists nor rule-takers but specialists who’ve got to know their industries over many years and market cycles. Experts in their chosen fields, our portfolio managers don’t rely on analysts; they carry out their own detailed research – company by company – to find the most promising investment opportunities. They’re active managers in every sense.
-
CAGR
The compound annual growth rate (CAGR) is the rate of return that an investment would need to have every year in order to grow from its beginning balance to its ending balance, over a given time interval. The CAGR assumes that any profits were reinvested at the end of each period of the investment’s life span.
-
S&P 500
The S&P 500 is a stock market index weighted by market capitalization that is made up of 500 of the largest public companies in the United States.
