Artificial intelligence has dominated markets and investor attention, with US large-cap tech stock performance propelling the S&P 500 to record highs and three consecutive years of 15%+ total returns from 2023 through year end 20251. The initial phase of the AI trade was characterized by investment in physical infrastructure and capital expenditure. However, as generative AI (Gen AI) matures, attention is shifting towards intangible factors like trust as a central driver of long-term opportunity and risk management.
Identifying the next generation of winning AI companies will therefore require a greater consideration of how companies are attempting to integrate and scale Gen AI while concurrently trying to preserve and build trust with their customers, host governments and employees. This balancing act will have implications for technology companies, AI infrastructure developers, and participants across the AI value chain.
Rather than focusing on infrastructure and capex, key issues for investors now include user acceptance, regulatory compliance, and stakeholder engagement:
- User safety and data integrity are central to building consumer trust. High-profile incidents and regulatory actions underscore the importance of robust guardrails, transparency, and responsible governance in AI product development.
- Community opposition and regulatory hurdles are slowing AI infrastructure expansion. Data center projects face increasing delays and cancellations due to concerns over electricity costs, water usage, and other local impacts, with sentiment evolving into legislative action in multiple US states.
- Data sovereignty and compliance are shaping digital geography. Over 70 countries have implemented or planned data localization requirements, compelling technology firms to invest in local infrastructure and adapt business models to sustain trust with host governments and access new markets.
- Workforce impacts are uneven and evolving. Early-career roles in AI-exposed sectors are experiencing employment declines, while education technology platforms and upskilling initiatives are positioned to help workers adapt and capture productivity gains.