presentation Wealth Insights | May 27, 2026

Positioning for the Next Wave of Innovation

Written by Shan Gao

Global equity markets have recently reached new highs, with the S&P 500 and Nasdaq trading near record levels as of May 2026. As of 11/05/2026, approximately 89% of S&P 500 companies had reported Q1 results. According to FactSet, 84% of those companies exceeded consensus expectations, with aggregate earnings above the 5-year and 10-year average.

Earnings growth has been led by technology, but it is increasingly broadening across industries. Small and mid cap equities have participated in the rally, while emerging markets have benefited from both improving domestic conditions and their role in global AI supply chains. International equities, while more volatile, continue to offer relatively attractive valuations and improving earnings potential.

Chart 1: 2026 YTD equity market performance

Source: Bloomberg, MSCI. Past performance does not guarantee future results.

Importantly, new market highs should not be viewed as a signal for caution in isolation. Equity markets typically reach new highs during periods of earnings expansion and structural change. The more relevant question is whether underlying fundamentals continue to support current valuations.

Strong Demand, Tight Supply

AI is increasingly being recognised as a structural shift rather than a cyclical theme. Since the launch of ChatGPT in late 2022, demand for AI related infrastructure has accelerated rapidly, with semiconductors among the primary beneficiaries. For example, TSMC’s 3 nanometre production capacity is expected to remain fully utilised through 2026, reflecting continued demand[1].

At the same time, supply has struggled to keep pace. Even as newer generation chips are introduced, demand for existing hardware remains elevated. NVIDIA’s Blackwell architecture is the newer generation, while H100 remains widely used. Despite this upgrade cycle, the annualised leasing cost for NVIDIA’s previous generation H100 GPUs increased from approximately USD 1.70 per hour in October 2025 to around USD 2.35 per hour by March 2026, representing a rise of roughly 40% in six months[2].  This suggests that AI is introducing a more structural demand component into what has historically been a cyclical industry.

From Capex Concern to ROI

To date, AI-related capital expenditure from major technology firms is projected to exceed USD 725 billion in 2026[3]. A key market concern has been whether this level of spending can generate sufficient returns.

There are now early signs that revenue visibility across leading model developers and cloud platforms is improving, suggesting that AI investment is beginning to translate into commercial outcomes.

Anthropic provides a useful case study. Unlike many other AI model providers that focus on attracting retail users, Anthropic has been more enterprise focused, with around 80% to 90% of revenue coming from enterprise customers[4]. While ROI has not yet been realised across the AI market in a broad and consistent way, Anthropic appears to be showing improving and more clearly realised returns over the last several quarters, with annualised revenue reportedly increasing from approximately USD 9 billion at the end of 2025 to USD 30 billion by March 2026, and further to USD 44 billion by April, alongside gross margins on its inference infrastructure rising from 38% to over 70%[5]. This suggests that more providers may follow a similar business model, with a greater shift toward enterprise clients and token based monetisation.

The Next Phase: Broad-Based Adoption

While early gains have been concentrated in semiconductors and hyperscalers, the next phase of AI is likely to be driven by broader enterprise adoption.

AI is increasingly being embedded into business operations as infrastructure, integrated into workflows, decision making, and execution. Enterprise platforms are enabling AI systems to automate complex, multi step processes across functions such as compliance, software development, and data analysis. Processes that previously required several hours can now be completed within minutes, highlighting the potential for meaningful productivity gains.

Chart 2: Sample process reduced from 3–4 hours to approximately 10 minutes

Source: AppliedAI Corporation Limited

Adoption today is widespread at the pilot stage, but large scale deployment with measurable return on investment is still evolving. According to a 2025 MIT study[6], 95% of generative AI pilots have yet to deliver measurable ROI or significant financial impact. However, this is typical in the early phases of technology adoption. As implementation improves, the benefits are likely to extend across industries, particularly in sectors with complex workflows and high regulatory requirements such as financial services and healthcare.

Our Positioning: Participating Without Concentration

While AI remains a powerful structural growth driver, the strongest market performance to date has been concentrated in semiconductors and hyperscalers. Valuations in these segments are elevated and reflect a high degree of optimism regarding future growth and profitability.

At the same time, the benefits of AI are likely to broaden across a wide range of sectors as adoption increases. Industries such as financials, healthcare, and industrials may see productivity improvements over time, often from a relatively lower valuation base.

Chart 3: Cumulative performance of Semiconductors, S&P 500 and Nasdaq since 31 May 1994

Source: Bloomberg

In this context, a more balanced approach is warranted. Maintaining exposure to AI remains important, but concentrating solely in the most crowded segments may not offer the most attractive risk reward.

From a market perspective, AI’s long‑term impact is unlikely to be confined to the technology sector. A diversified portfolio that captures both upstream beneficiaries and downstream adopters is well positioned for the next phase of the cycle. This allows participation in the broader AI theme while avoiding excessive concentration in segments where expectations are already stretched.

In our view, this remains a constructive backdrop for investors. A disciplined and diversified approach allows participation in the AI opportunity while staying positioned for broader market leadership over time.

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References

[1] Reuters, https://www.reuters.com/world/asia-pacific/tsmc-likely-book-fourth-straight-quarter-record-profit-on-insatiable-ai-demand-2026-04-13/

[2] Semi Analysis, https://newsletter.semianalysis.com/p/the-great-gpu-shortage-rental-capacity

[3] Financial Times, https://www.ft.com/content/b3dfaba9-17a2-4fac-90fe-4ab3ca7c9494?syn-25a6b1a6=1

[4] Reuters: https://www.reuters.com/business/retail-consumer/anthropic-aims-nearly-triple-annualized-revenue-2026-sources-say-2025-10-15/

[5] SemiAnalysis: https://newsletter.semianalysis.com/p/ai-value-capture-the-shift-to-model

[6] Fortune, https://fortune.com/2025/08/18/mit-report-95-percent-generative-ai-pilots-at-companies-failing-cfo/