The extraordinary acceleration in AI investment was the defining theme for markets in the second quarter of the year. Capital spending by US technology giants drove strong demand for power and hardware, helping global equities rise 14% in their best quarter for six years.1 Semiconductor stocks gained around 90%, while technology-heavy Asian markets, particularly Korea and Taiwan, significantly outperformed.2

The strength of the rally has been supported by rising earnings expectations and the substantial cash resources of the companies leading the AI build-out. However, demand remains concentrated among a relatively small number of major spenders. This leaves markets vulnerable to a correction if investment plans are scaled back, reinforcing the importance of remaining disciplined and diversified.

Beyond AI, the quarter may prove to be a landmark period for sustainability. Surging electricity demand from data centres, disruption to oil and gas supplies following the conflict in Iran, and severe climate volatility linked to El Niño have combined to strengthen the strategic case for the energy transition.

Renewables are increasingly central to meeting this challenge. Solar, battery storage and onshore wind offer some of the fastest and most cost-effective sources of new generation. They also reduce dependence on fragile fossil-fuel supply chains, improving national energy security and economic resilience. China’s extensive investment in renewable infrastructure and clean-technology manufacturing illustrates the strategic value of this preparedness.

For investors, the opportunity extends beyond the strongest-performing areas of the market. Healthcare showed signs of recovery in June, while the long-term fundamentals supporting water infrastructure remain compelling despite recent weakness. Education is also presenting new opportunities, particularly within emerging markets.

Looking ahead, the focus for Tribe portfolios remains on emerging markets and the energy transition, while maintaining diversification, no exposure to fossil-fuel companies and a measured approach to large technology businesses where questions remain over returns on AI investment.