Nvidia delivered another set of blowout results last week, but equity markets sold off anyway. Management's message was clear: keep the faith in AI spending. Yet the details raised fresh concerns. Another multibillion-dollar investment in Anthropic, rising receivables suggesting customer payment stress, and questions over GPU useful lifespan all fed the growing unease.
Historically, more investors have lost money trying to call the top of a bubble than have made money from it. The circular funding (OpenAI backed by its own vendors, data centres raising capital for empty shells) suggests, in our view, we're in bubble territory (even if NVIDIA’s Jensen Huang disagrees.) But trying to time it would be a fool's errand.
What's more fruitful, in our opinion, is understanding where in the tech sector profits are growing and where they're being destroyed and then positioning accordingly. This isn't about avoiding volatility but about building resilience when a pullback comes.
Figure 1. Hyperscaler capex growth outpaces cash flow generation
Note: Hyperscalers include the following companies: Amazon, Google, Meta, Microsoft, Oracle. Source: BofA Global Research, Bloomberg, Visible Alpha, as at 10 November 2025.
Problems loading this infographic? - Please click here
Where are profits heading?
AI represents the first technology developed by the tech sector that will disrupt itself in such a material way. Of the US$4 trillion global tech industry, roughly US$2.4 trillion sits in the addressable market for AI disruption. That creates clear winners and losers.
IT services and call centres for example are seeing real, measurable shrinkage and here the promise of AI automation isn't theoretical anymore. These industries face existential pressure as AI proves it can handle tasks that previously required human intervention.
On the winning side are infrastructure software providers. AI models need direct access to data, making infrastructure software providers more essential, not less. Equally, mission-critical enterprise software, like enterprise resource planning (ERP), that sits at the heart of businesses won't be ripped out quickly, regardless of how fast AI develops. Even the AI companies themselves depend on this infrastructure layer and such mission critical reliance.
The key to wider AI adoption is making it cheaper to run
In AI's early stages, companies needed flexible, general-purpose chips that could handle any type of model. But as the technology matures, the focus is shifting to specialised chips designed for specific tasks. These specialised chips could deliver the same performance while using far less power and costing significantly less to operate.
The smarter investment strategy, in our view, is to back companies that are driving down AI costs through these specialised chips, whilst avoiding – or even shorting – those relying on power-hungry generic alternatives. This approach still captures the growth potential of AI, but with much better downside protection if AI spending slows or becomes more rational.
The China factor
AI competitiveness will ultimately be measured by a simple equation: tokens generated per unit of power per dollar spent. China has closed what was once a decades-long technology gap to roughly one to two years in AI capabilities. While semiconductor technology still lags by several years, Chinese hyperscalers compensate with advantages elsewhere: more data, significantly more power, and cheaper costs. China adds the equivalent of the entire US power grid every two years. American data centres, by contrast, face two to three year waits for new capacity.
With necessity being the mother of invention, Chinese semiconductor companies, driven by self-sufficiency requirements, represent an expanding opportunity as they close the technology gap at speed. Meanwhile, Chinese hyperscalers are balancing semiconductor shortcomings with software and model innovations.
For Western companies, staying competitive means securing power wherever it's available. US hyperscalers are already seeking capacity in Korea, Japan and the UAE, with those countries demanding AI compute in return. This power hunt is creating investment opportunities beyond traditional tech hubs.
Adoption will be slower than hype will make you believe
None of this means the current spending levels are risk-free or that a pullback won't happen. The tech sector has a consistent pattern: it gets excited about transformative technology, the promise seems immense, spending surges, and then reality forces a pause. We've seen it with cloud computing, with 4G and 5G rollouts, and we'll likely see it here.
The reality is that behavioural change moves far more slowly than technological capability. Technology advances rapidly, but enterprises move excruciatingly slowly. Right now, AI is being used for NDAs and managing minor administrative tasks, but not for core functions like balancing accounts because it isn't deterministic enough yet. Enterprise adoption is just scratching the surface. There's still a long way to go before AI delivers even a fraction of its promise in actual workflow transformation.
This gap between capability and adoption creates the digestion period. Capex will pull back as reality tempers enthusiasm. But if AI ultimately automates even 10% of what it's capable of, current spending levels may become justifiable over time. The US$2.4 trillion addressable market within tech alone suggests the return on investment may materialise, even if the path there includes significant volatility. The question is whether all investors will see adequate returns, and when.
All data sourced from Bloomberg unless otherwise stated.
Author: Sumant Wahi, a Portfolio Manager covering technology at Man Group.
All investments are subject to market risk, including the possible loss of principal. It is not possible to invest directly in an index. Alternative investments can involve significant additional risks. Past performance is no guarantee of future results.
Opinions expressed are those of the author and may not be shared by all personnel of Man Group plc (‘Man’). These opinions are subject to change without notice, are for information purposes only and do not constitute an offer or invitation to make an investment in any financial instrument or in any product to which the Company and/or its affiliates provides investment advisory or any other financial services. Any organisations, financial instrument or products described in this material are mentioned for reference purposes only which should not be considered a recommendation for their purchase or sale. Neither the Company nor the authors shall be liable to any person for any action taken on the basis of the information provided. Some statements contained in this material concerning goals, strategies, outlook or other non-historical matters may be forward-looking statements and are based on current indicators and expectations. These forward-looking statements speak only as of the date on which they are made, and the Company undertakes no obligation to update or revise any forward-looking statements. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those contained in the statements. The Company and/or its affiliates may or may not have a position in any financial instrument mentioned and may or may not be actively trading in any such securities. Any data services and information available from public sources used in the creation of this material are believed to be reliable. However, accuracy is not warranted or guaranteed. The information provided does not take into account the specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on an investor’s objectives and circumstances and in consultation with his or her financial professionals.
You are now leaving Man Group’s website
You are leaving Man Group’s website and entering a third-party website that is not controlled, maintained, or monitored by Man Group. Man Group is not responsible for the content or availability of the third-party website. By leaving Man Group’s website, you will be subject to the third-party website’s terms, policies and/or notices, including those related to privacy and security, as applicable.