The AI Investing Pulse

March 27th, 2025

In this week’s edition:

1. Analysis - Are AI Infrastructure Stocks Heading into a Bubble?

2. Stock Ideas - 4 AI Stocks for the Long Term, says Manager of 5 stars Fund

3. News - Which Stocks Benefit from AI Spending

4. Startups - Crystal Huang on the High-Stakes Future of AI Startups

5. Trends - Autonomous Trading: How Fintech Data is Powering Hedge Funds

6. Other News - AI is a Form of Alien Intelligence

Are AI Infrastructure Stocks Heading Into a Bubble?

“We may be heading into a bubble,” Alibaba’s Joe Tsai said at the HSBC Global Investment Summit in Hong Kong this week. He was referring to the extraordinary capital flowing into AI data centre buildouts—particularly in the U.S., where estimates suggest technology firms could deploy upwards of $500 billion over the coming years.

While Tsai’s remark may seem surprising, given Alibaba’s own $52 billion commitment to AI and cloud investment, his underlying message is more nuanced: AI demand is real—but infrastructure is being built far faster than it can be monetised.

🔁 A Crossroad for AI Infrastructure

Nvidia’s strong earnings and the aggressive infrastructure buildouts by Microsoft, Meta, and Amazon have reinforced the narrative of surging AI demand. Nvidia’s H100 and upcoming Blackwell chips remain central to that momentum, though signs of overreach are starting to appear.

Joe Tsai has warned of “a lot of capital being poured into building capabilities that may not be needed yet,” and even Nvidia and Meta have acknowledged that monetisation is still uneven and enterprise adoption remains early. In February, TD Cowen reported that Microsoft cancelled several U.S. data centre leases, suggesting a potential rebalancing—despite its broader $80 billion AI and cloud investment plans.

The message is clear: even the most well-funded players are reassessing near-term deployment. If Microsoft is quietly pulling back, it reinforces Tsai’s view that infrastructure may be running ahead of real demand. This isn’t about AI’s long-term future—it’s about recognising the risk of capital getting ahead of cash flow.

📉 Some of the Stocks Exposed if the Bubble Pops

Should AI infrastructure growth outpace real-world adoption, the impact would cascade across the entire ecosystem:

1. Hyperscalers (Overbuild Risk)

• Microsoft (MSFT) – Azure at the centre of AI expansion, underpinned by OpenAI partnerships

• Alphabet (GOOGL) – Investing heavily in TPUs and Google Cloud AI services

• Amazon (AMZN) – Scaling AWS compute and custom silicon (Trainium, Inferentia)

• Meta (META) – Allocating ~$40bn annually, primarily for LLM training infrastructure

These firms face the risk of building ahead of utilisation, leaving expensive capacity underdeployed.

2. Semiconductor Suppliers (Volume Risk)

• Nvidia (NVDA) – Dominant supplier of AI GPUs; exposed to any hyperscaler capex pullbacks

• AMD (AMD) – Betting on hyperscaler adoption of its MI300 chips

• Broadcom (AVGO) / Marvell (MRVL) – Provide networking and interconnect technology to AI clusters

Chipmakers rely on sustained high-volume orders. A slowdown in infrastructure rollout would pressure growth expectations.

🔌 Other Impacted Sectors: Power and Cooling

Beyond chips and cloud, the AI buildout is driving demand for high-density power and cooling systems. Data centres require massive energy and advanced thermal management. Vertiv (VRT) plays on the cooling side, while Vistra (VST), Constellation Energy (CEG), and NRG (NRG) are key power suppliers to hyperscalers.

If rack utilisation drops or buildouts slow, both power demand and supporting infrastructure could face underperformance.

🧧 China’s Cautious View vs. U.S. Optimism

Tsai’s comments also highlight a growing strategic divide. While U.S. firms continue to push AI capex to record highs, Chinese tech companies are adopting a more conservative posture.

Alibaba Cloud is still investing, but doing so selectively—focusing on internal AI models and ecosystem alignment rather than scale for its own sake. Export controls, regulatory pressure, and domestic economic caution are shaping a more restrained approach.

That contrast raises a fundamental question: Are U.S. firms underestimating structural risks, such as delayed enterprise adoption, regulatory friction, or limited near-term monetisation—that Chinese firms are already pricing in?

🔍 Infrastructure vs. Reality

AI is unquestionably one of the most transformative trends of this decade. But not all AI investments are equal. There’s a crucial distinction between AI as a structural growth theme and the infrastructure cycle that supports it. The former has longevity; the latter is capital-intensive, highly sensitive to timing, and vulnerable to overshoot.

Joe Tsai’s warning isn’t about AI’s potential; it’s about the risk of misjudging when that potential turns into profit. That mispricing could be the real bubble.

_{Disclaimer - This content is provided for informational purposes only and does not constitute investment advice, personal recommendations, or an invitation to engage in any investment activity. The information presented is derived from publicly available sources and should not be solely relied upon for making investment decisions. Always consult with a qualified financial professional before making investment choices. Past performance is not a guide to future performance.}

TOP AI STOCKS

TOP AI ETFs

AI STOCKS IDEAS 

4 AI Stocks for the Long Term, says Manager of 5 stars Fund - MarketWatch

3 Essential AI Infrastructure Stocks to Watch - The Motley Fool

Cathie Wood’s Top 12 AI Stocks - Insider Monkey

AI STOCKS & ETFs NEWS 

Which Stocks Benefit from AI Spending - Benzinga - The rise in AI spending is set to benefit software companies, driven by increased investments from major players and emerging firms.

Microsoft Launches AI Agents to Automate Cybersecurity Amid Rising Threats - CSO - Microsoft has unveiled AI agents to enhance its Security Copilot, aiding cybersecurity teams in automating tasks and improving response times amidst rising threats.

We Saved $350m Last Year using AI Agents - CTECH - ServiceNow use AI in customer service, IT support, HR processes, developer assistance, and marketing, and they are expanding its use to other areas of the company.

AI STARTUPS

Crystal Huang on the High-Stakes Future of AI Startups - MediaBrief - Her warning is clear: if your AI product is easy to adopt, it’s just as easy to abandon.

The AI Revolution: Startups Building the Future, One Algorithm at a Time - CXO Today - Several startups are pushing the boundaries of AI, using it in unique ways tailored to their respective industries.

Agentic AI Startup Browser Use Raise $17m - MSN - The company focuses on converting website interfaces into more “readable” structured text that LLMs can process deterministically.

AI TRENDS

Autonomous Trading Systems: How Fintech Data is Powering Hedge Funds - Programminginsider - Hedge funds have been quick to leverage AI, machine learning, and big data analytics to gain an edge in highly competitive financial markets.

The Future of AI with Linkedin Reid Hoffman - HNR Studio - Tech visionary and co-founder of LinkedIn Reid Hoffman joined Dean Erika James to discuss the profound implications of an AI-powered future.

China Narrows AI Development Gap with US - Communication Today - China has narrowed the AI gap to just three months in some areas, because firms like DeepSeek have worked out how to use chips and apply algorithms more efficiently.

OTHER

AI is a Form of Alien Intelligence - PopularMechanics - Harvard Professor claims it will surpass humanity and will be essential for us as a species to maintain superiority.

Open AI has Released its First Research into How Using ChatGPT Affects People - TechnologyReview - We’re starting to get a better sense of how chatbots are affecting our emotional well-being, but there’s still a lot we don’t know.

_{Disclaimer - The information contained on this newsletter does not constitute investment advice or a personal recommendation, nor is it an invitation or inducement to engage in investment activity. You should seek independent financial and, if appropriate, legal advice as to the suitability of any investment decision. Past performance is not a guide to future performance. The value of investments, and the income from them, can fall as well as rise. You may not get back the full amount invested and, in some cases, nothing at all. The information presented is based on publicly available data and sources believed to be reliable; however, its accuracy or completeness cannot be guaranteed. Market conditions can change rapidly, and the information provided may no longer be up to date. This content is for informational purposes only and should not be construed as financial, legal, or tax advice.}