BlackRock is betting on scarce resources in AI supply chains. How should you build your portfolio?

It is still too early to determine the winners and losers in the race for artificial intelligence, so investors should look for the best opportunities in the market’s “bottlenecks”—namely, companies that provide scarce but critically important resources for AI, according to BlackRock.

Amid the current uncertainty, BlackRock recommends favoring U.S. stocks in portfolios and paying particular attention to companies that address “bottlenecks” in supply chains or supply scarce resources, Barron’s reports, citing Wei Li, global chief investment strategist at BlackRock Investment Institute. Specifically, this includes companies in the energy sector, battery manufacturers, and industrial producers.

The United States holds an advantage in several areas at once. The country possesses cutting-edge microchips, the most advanced AI models, and energy independence, as well as deep capital markets necessary to finance AI development. According to Li, U.S. stock and bond markets account for 90% of global volume, while Japan and China account for about 10%.

“Europe has significant resources, but its ability to mobilize them has so far been less effective. It’s difficult to pick winners because this is all just getting started, but if you consider the advantages the U.S. has, [...] it’s likely that many of the winners from the spread of AI will be in the American market,” Li said.

China also has a strong presence in some of these “bottlenecks,” including batteries for AI, industrial manufacturing, robotics, and rare earth elements. However, Wei Li is more selective when it comes to the Chinese market due to lower returns on capital and fierce price competition, which means that gaining market share does not always translate into higher profits.

AI is still in the early stages of its supercycle: companies are still seeing a good return on their investments, Li believes. Furthermore, she does not expect a negative impact from a potential rise in interest rates: this will not undermine the prospects of companies targeting market “bottlenecks,” capital expenditures in AI, the energy transition, or supply chain restructuring, the strategist believes.

However, BlackRock warns that diversification will become increasingly difficult going forward, as AI is permeating a wide variety of asset classes, and some attractive sectors, such as infrastructure, do not fit neatly into a single category.

For those looking for non-AI investments, European financial companies appear to be attractively valued, Li said. Her team also sees promising opportunities in the U.S. healthcare sector: “AI is transforming the sector, but [our] confidence is largely based on valuation, and we’re starting to see an upward revision in earnings forecasts, even though the momentum is still lagging.”

Infrastructure could serve as another potential stabilizer for investment portfolios. According to Li, this sector lies at the intersection of several major trends that extend beyond AI, such as an aging population, geopolitical fragmentation, and the energy transition. The strategist believes that infrastructure’s share of investors’ asset allocation could approach 20%, if market participants gain access to it through various instruments—ranging from bonds and stocks to direct investments and direct funding of projects.

This article was AI-translated and verified by a human editor