Australia's largest pension fund, the A$430 billion ($301.7 billion) AustralianSuper, said it will stick to the "picks and shovels" of the AI industry as it navigates unprecedented turbulence in the market for global tech stocks.
Mark Hargraves, the head of AustralianSuper's international equities and private equity business, said the fund believed chipmakers and hyperscaler data centres would weather the current storm engulfing the AI sector.
The comments show how one of Australia's biggest investors is positioning its AI holdings as doubts grow over whether the sector's earnings can justify its astronomical valuations.
One of the Melbourne-based firm's largest AI-linked exposures in its balanced portfolio is Nvidia, where it holds about A$3.05 billion worth of stock, according to recent filings. It holds more of the chipmaker's stock in other fund options.
AustralianSuper also owns about A$2.3 billion each in Microsoft and Alphabet, the filings show, as well as stakes in SK Hynix, SpaceX, Meta, Broadcom and Micron.
"Large language models require compute power and the hyperscalers are providing that with the data centres, and that compute is driven by chips," Hargraves told Reuters in an interview on October 28.
"We've been quite focused on what we call the picks and shovels. But as the landscape is evolving, then we ... see the opportunity sets developing and we kind of move exposures accordingly."
Globally, AI shares have stumbled amid growing doubts over whether earnings can keep pace with lofty valuations, prompting investors to reassess crowded positions after a prolonged rally.
Still, many fund managers remain bullish on the sector's long-term prospects, betting demand for AI chips, data centres and related infrastructure has further to run.
AI and AI-related stocks now made up about 40% of the global equities market, Hargraves said, adding that the growth of the industry and its influence on markets had been the fastest emergence of a major investment theme he had seen in more than 30 years working in equities.
"I've seen a lot of evolution over time. I think this cycle, the rate of evolution is happening faster than previous cycles," he said.
"Some of the volatility you're seeing is reflective of that speed of change. It is leading things to change quite quickly and the best is having to constantly reassess things."
Hargraves said that while AustralianSuper was a pre-IPO investor in Anthropic, he would not comment on the fund's intention in the upcoming share sale that would value the US company at $1.5 trillion to $2 trillion.
Instead, he said the IPO would give investors a greater insight into the financial forecasts of the large language models.
