What We're Seeing: AI Boom Continues – 7 July 2025

The Week in Brief

Technology and growth stocks surged in July 2025. NVIDIA, AMD, and other AI leaders saw double-digit jumps on strong guidance, pushing the Nasdaq to fresh highs. The S&P 500 also hit all-time highs, carried by the outsized gains in the technology sector.

The AI theme, which some had questioned after a quieter first quarter, came roaring back. Companies are not just talking about AI adoption; they are spending real money. Capital expenditure guidance from hyperscalers confirmed that the buildout is accelerating.

The Investment Cycle

The AI investment cycle is proving longer and larger than initially expected. Data centre construction, chip orders, and power infrastructure are all ramping. Companies that provide the picks and shovels for this buildout are reaping the rewards.

NVIDIA remains the dominant player. Its guidance exceeded expectations, with demand for its latest chips outstripping supply. The company’s competitive moat appears durable, though competition is intensifying.

Sector Dynamics

Energy and industrials lagged amid the tech surge. When growth stocks take command, more cyclical areas often fade into the background. The rotation was not about fundamentals but about allocation: investors were adding to winners at the expense of laggards.

Bond yields crept up during the week, tempering some of the late-week gains. The move was modest, but it served as a reminder that higher rates remain a constraint on valuations.

Our Read

We think the AI theme has staying power. The productivity gains from AI adoption are real, even if they take time to flow through to corporate earnings. Companies across industries are finding applications, and the technology is improving rapidly.

That said, valuations in the AI space are stretched. NVIDIA and its peers trade at multiples that embed aggressive growth assumptions. The margin for error is thin. Any disappointment on earnings or guidance could trigger sharp corrections.

Our approach is to maintain exposure to high-quality AI beneficiaries while being selective about entry points. We would add on meaningful pullbacks rather than chase momentum at current levels.

What Could Change Our View

A slowdown in AI spending would be concerning. If hyperscalers pull back on capital expenditure or if demand for chips falters, the narrative would shift quickly. We are also watching for signs of commoditisation: if competitors erode NVIDIA’s margins, the investment case weakens. For now, the trend remains firmly higher.

This is informational commentary, not investment advice.