The AI Boom Enters Its Next Phase

Over the past year, I’ve written about why large-cap technology companies would lead the next wave of innovation. That view remains intact. What is changing in early 2026 is not the importance of AI, but who is participating in its benefits.

Over the past couple of years, “the AI trade” was concentrated in the Magnificent Seven and the software and semiconductor companies building foundational models and computing capacity. Today, participation is broadening. Markets are beginning to reward companies that are using AI to drive measurable productivity, efficiency, and margin expansion, across industrials, energy, utilities, infrastructure, manufacturing, retail, and logistics.

At the same time, investors are scrutinizing the scale of capital expenditures being deployed by mega-cap technology firms. Announcing multi-billion-dollar AI investments is no longer enough; shareholders are demanding clearer returns, stronger free cash flow visibility, and disciplined capital allocation. As discussed on BNN Bloomberg earlier this week with Harbourfront’s Chief Investment Officer, Theresa Shutt, this shift reflects a healthy recalibration rather than a collapse in the AI thesis.

We are also seeing structural evolution within software. As AI capabilities become embedded in products, costs are moving into the delivery model, pressuring traditional high-margin pricing structures. Some companies are transitioning toward usage- or outcome-based pricing, creating short-term volatility but potentially more durable long-term models.

Meanwhile, the “physical economy” supporting AI continues to see sustained demand, from power generation and grid upgrades to data centre construction and equipment. Increasingly, companies outside of technology are quantifying how AI is improving supply chains, reducing costs, and enhancing decision-making. The next phase of this cycle will likely reward those translating innovation into tangible earnings growth.

Importantly, this is not about dramatic portfolio shifts. Most portfolios already have diversified exposure to both technology leaders and the industrial, energy, and infrastructure businesses benefiting from broader AI adoption. This balanced positioning is intentional.

Innovation cycles often begin narrowly and expand over time. We believe this broadening phase reinforces the value of diversification, quality balance sheets, and disciplined capital allocation, principles that remain central to our approach.

We remain confident that exposure to both AI developers and AI beneficiaries positions portfolios well for the next stage of this economic transformation.

You can view Theresa’s recent BNN interview here: Investors question amount of spending in AI – BNN Bloomberg