U.S. Stocks: Geopolitical Risks and AI Investment Strategies

U.S. tech companies are focusing on domestic operations to mitigate geopolitical risks and capitalize on AI growth.

### U.S. Stock Exceptionalism: Navigating Geopolitical Risks and AI Growth
* 📈 U.S. stocks have reached **record highs** despite global turmoil, showcasing their exceptionalism, particularly in the tech sector, which is highly exposed to geopolitical risks with about **60% of revenue coming from overseas**.
* 🔍 Investors are now focusing on U.S.-based companies that **buy, build, and sell domestically** to mitigate **geopolitical risks** inherent in the tech sector.
* 💻 Companies involved in artificial intelligence, especially those in data centers and power sectors, are seen as **critical to this strategy**, reflecting a **shift towards more localized operations**.
* 🔋 As the artificial intelligence landscape evolves, the "**Magnificent Seven**" has driven a concentrated rally, but the upcoming years are expected to **broaden this impact across various technology and semiconductor stocks**.
* 🔒 The increasing value of data is likely to **enhance the significance of cybersecurity stocks**, while adjacent industries like financial services and healthcare are poised for **greater productivity through AI advancements**.
* 💰 Bitcoin's recent surge past **$100,000** is viewed as a potential **hedge against geopolitical risks**, attracting professional managers who are beginning to **explore digital assets**.
* 🌍 International investments are also gaining traction, particularly in India and Mexico, as supply chains **diversify and reshape** in response to U.S. manufacturing efforts and trade relations.

U.S. stocks have continued to show their exceptionalism. We've had record highs yesterday amid global turmoil. What do you make of that? Well, actually, the tech sector in the United States is one of the most geopolitically exposed sectors out there.

About 60% of the revenue of tech comes from overseas. So one of the ways that we've been looking at geopolitical fragmentation is: can you really tilt your exposures within the tech sector to companies that buy in the United States, build in the U.S., sell in the United States, really to

try to isolate some of that geopolitical risk that I think is very present in the tech sector in particular. Why would that end up leading you? Which companies? I mean, first and foremost, you might think, well, those that are benefiting from the chips that you've been building

here in the United States. But then Intel hasn't exactly been having the best of times. Well, it's coming from a range of companies just kind of across different industries within technology. I mean, I think if we look at artificial intelligence, we see that a lot of the

leadership is with U.S.-based companies. For example, you could look specifically at data centers and power companies as being really important parts of the ecosystem, but are very localized to the United States. So you're getting some of that isolation from geopolitics.

We even brought out an entire fund based off of this strategy.  It's really looking at the tech sector but tilting towards those U.S., very domestically focused companies to isolate geopolitical risk. That's really interesting. The infrastructure buildout is one that

Many have turned to other things than just thinking, 'Okay, I'm in video chips and shovels.' We then think about the next layer down: energy companies. How many people are asking you, 'Well, what about application layers? What about the next frontier of AI?' That's really where a lot of the

conversations are going.
I think, you know, if we look at the last two years, it's been a huge focus on the Magnificent Seven, and it's been a really concentrated rally within artificial intelligence. We think, as we enter the third year of what we're really calling the build

phase of artificial intelligence, this is when the markets are going to recognize that this is something much bigger, that's going to impact a wider range of technology stocks, a wider range of semiconductor stocks, and the power stocks.
It could even impact cybersecurity

stocks as data gets more valuable and needs to be protected. And you can even look at adjacent industries like financial services and healthcare, where AI can really create more productivity and efficiency. So I think we're going to see a transition in 2025 to really a

broadening of that artificial intelligence story. How much of the story started to pick up back in crypto for you as well, Jake? Well, it's significant. You know, of course, Bitcoin passing $100,000 is a significant milestone. But really, you have to take a step back

and look at the broader picture of why this is happening. I think there's certainly some anticipation of more friendly regulatory tailwinds. But also, in your previous segment, you were just highlighting some of the geopolitical risks around the world,

Europe, in Asia, and in a lot of ways, professional managers, who are really just starting to access digital assets for the first time with our launch of our Bitcoin ETP, are thinking about it as a hedge in their portfolio.

This thing behaves very differently from stocks and bonds, and if you see more geopolitical risk, Bitcoin could really benefit. What's interesting about your role is not only are you thinking about strategy for leadership clients, but you're also thinking about the international ETF offering as well.

And I'm just interested in whether anyone is investing outside of the US.  They are, but in more targeted ways where we've seen some really significant flows in the past year, specifically looking at India as a play on changing supply chains, particularly if

you look at a lot of the reshoring that's happening in the United States. There's been an effort to build more domestically, but also to diversify supply chains geographically. India has been a major beneficiary, just like

we have a chip sector in the United States. They've been focused on building out more chip capacity, as well as building out more tech manufacturing. So India has been a big beneficiary. Mexico as well,

as you look at near-shoring and the interplay of growing trade relations between the U.S. and Mexico.

AI Impact to Be Larger Than Thought: BlackRock's Jacobs

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US Tech Sector's Geopolitical Exposure and Investment Strategies

US stocks, particularly tech, show exceptional performance despite global turmoil.

Significant portion of tech revenue comes from overseas, creating geopolitical risk.

Investment strategy focuses on US-based tech companies to mitigate geopolitical risk.

AI, data centers, and power companies are highlighted as examples of localized, less geopolitically exposed sectors.

A fund was created based on this strategy, focusing on domestically focused US tech companies.

The Expanding AI Landscape and Investment Opportunities

Discussion shifts to the next frontier of AI and its impact beyond the Magnificent Seven.

The build phase of AI is expected to broaden its impact across various tech sectors.

Potential impact of AI on semiconductors, power, cybersecurity, financial services, and healthcare.

Anticipation of a broader AI story in 2025, impacting a wider range of stocks.

Discussion turns to Bitcoin's rise and its significance.

Factors contributing to Bitcoin's growth include anticipated regulatory changes and geopolitical risks.

Bitcoin viewed as a portfolio hedge against geopolitical uncertainty.

Discussion of international investments, particularly in India and Mexico.

India benefits from reshoring and diversification of supply chains.

India's focus on building chip capacity and tech manufacturing.

Mexico benefits from near-shoring and growing US-Mexico trade relations.