AI Investing: Distinguishing Durable Winners from the Hype

GMO argues that the AI investment boom is creating both extraordinary opportunities and significant risks across the technology value chain, demanding a disciplined approach to equity selection. 

• AI ecosystems span four layers—applications, large language models, hyperscale compute, and suppliers—each with different risk-return profiles.

• Hyperscalers such as Microsoft and Alphabet are best positioned, using strong existing cash flows to fund AI investment without existential risk.

• Suppliers tied to hyperscaler growth face greater cyclicality if AI infrastructure spending slows. 

Which companies truly benefit from AI—and which merely ride the hype cycle? The full report dissects the value chain and investment implications.