Vanguard Flags 3 ETFs to Outperform as $700 Billion AI Spend Shifts Gains Beyond Big Tech
Updated
Updated · The Motley Fool · Jul 12
Vanguard Flags 3 ETFs to Outperform as $700 Billion AI Spend Shifts Gains Beyond Big Tech
3 articles · Updated · The Motley Fool · Jul 12
Summary
Three Vanguard funds — Industrials ETF, Financials ETF and Value ETF — are positioned to benefit as AI-fueled tech leadership fades and investors rotate toward sectors tied to a later-cycle economy.
Manufacturing data underpin the industrials case: the Fed’s industrial production index hit a multiyear high in May, while ISM manufacturing PMI rose to 54.5, its best reading in four years.
AI spending still supports that trade even as tech enthusiasm cools, with major companies planning more than $700 billion of AI infrastructure capex this year and Goldman Sachs projecting over $1 trillion next year.
Financials get support from still-solid U.S. activity — retail and restaurant sales are up 4.3% year to date, unemployment is 4.3%, and large banks reported Q1 loan and deposit growth without a significant rise in charge-offs.
Value has already started to lead: Vanguard Value ETF is up about 15% this year versus 7.5% for Vanguard Growth, helped by higher-rate conditions and less exposure to a handful of mega-cap tech stocks.