Insight Beyond the US and AI: Where are investors finding opportunities?

With US equities dominating global markets and AI-related stocks continuing to draw investors’ attention, our latest equities webinar (replay available here, registration required) aimed to answer one question: where do the risks and opportunities lie from here?

The panel explored market concentration, the outlook for AI-related companies and whether investors should be looking beyond the US. The webinar also covered opportunities across global and emerging markets, and why diversification could become increasingly important.

Here are five key takeaways from the session: 

1. Market concentration is becoming harder for investors to ignore

Concentration has been a feature of equity markets for some time, but the scale of it is creating new challenges. The US now represents a significant share of global equity indices, while a small number of large companies account for an outsized proportion of the US market.

And this is not just a US story. Concentration is also evident in Asian and emerging markets within technology and semiconductor companies.

For active investors, the challenge is not simply whether to own these companies, but how much exposure to take. The panel stressed the importance of understanding both the risks of owning the largest benchmark constituents and the risks of avoiding them altogether.

2. The case for looking beyond the US is getting stronger, but it isn’t about abandoning America

The US market has delivered strong returns over the long term, supported by successful companies. But its growing weight within global indices means investors can end up with a substantial proportion of their equity exposure tied to one country, one currency and a narrow group of companies.

Valuations add another consideration. While valuation can be an unreliable short-term indicator, the panel argued that it can provide useful information about longer-term return expectations.

Rather than making an extreme call on US equities, the discussion focused on broadening sources of return across regions and investment styles, including opportunities in the UK, Europe, and emerging markets.

3. AI may be transformative, but investors still need to ask what they are paying for that growth

The panel stopped short of declaring an AI bubble. Instead, the discussion focused on a more fundamental question: what assumptions are already reflected in share prices?

AI investment has continued to grow, but that expansion is becoming increasingly capital intensive. For some companies, current valuations require strong earnings growth and margins to persist for a considerable period.

Investor psychology matters too. Themes such as railways and the internet brought genuine technological change, but enthusiasm for transformational technologies can encourage investors to extrapolate today's growth far into the future. The panel highlighted the importance of remaining disciplined rather than allowing fear of missing out to drive investment decisions.

4. Looking beyond AI is uncovering opportunities in overlooked parts of the market

As capital has flowed towards AI-related companies, other areas of the equity market have received less attention.

The panel highlighted opportunities across areas including healthcare, medical technology, insurance, and consumer staples.

In Asia and emerging markets, Chinese consumer companies were another area of interest following several difficult years for the domestic consumer. In Asia and emerging markets, Chinese consumer companies were another area of interest following several difficult years for the domestic consumer. 

There may also be opportunities among companies perceived as potential “AI losers.” Some continue to perform well fundamentally, despite concerns that AI could eventually disrupt their business models. The key, the panel argued, is distinguishing between businesses facing genuine structural challenges and those where market expectations may have moved too far.

5. Diversification could matter more as market leadership broadens

One message connected all three investment perspectives: investors should be deliberate about where their risks are coming from.

That means looking beneath headline allocations and considering exposure to individual companies, sectors, countries, currencies, and investment themes. A portfolio that appears diversified on the surface can still be heavily influenced by the same underlying driver, particularly given AI-related exposure across US and emerging equity markets.

Rather than relying on one market or theme to continue delivering, the panel emphasised portfolios built around various sources of return. For active managers, bottom-up stock selection and valuation discipline remain central. For multi-asset investors, a discerning approach to accessing the broad opportunity set available across asset classes and geographies can help deliver greater diversification potential.

Click here to watch the full recording.

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• David Aulja is in our Multi-Asset Solutions team and is lead portfolio manager for our Multi-asset Funds. 
• Emily Roberts is deputy fund manager in our EMEA- Global Equities team and is deputy fund manager and her team manage the Invesco Global Equity Fund (UK).
• Charles Bond is a fund manager in the Asia & EM Equities, team and manages the Invesco Global Emerging Markets Fund (UK).
• Ben Gutteridge, our webinar host, is Head of Market Insights at Invesco. He also hosts Invesco’s Time in the Market podcast and our Investment Intelligence seminars and webinars.