AI Stock Rally Still Has Room to Run, Fund Managers Say, Despite Valuation Concerns

Portfolio managers say the current rally is being driven less by speculative momentum and more by tangible revenue expansion, with AI-driven data-center investment, enterprise adoption, and global competition fueling multi-year capital expenditure cycles. U.S. chipmakers, cloud-service providers, and leading Asian hardware manufacturers continue to post strong earnings, reinforcing confidence among investors that AI is entering a monetization phase comparable to the early stages of the mobile-internet boom.

Despite stretched valuations in some segments, particularly GPU makers and high-growth software firms, fund managers argue that earnings revisions remain broadly positive. Supply-chain players across Korea, Taiwan, mainland China, and Japan are benefiting from surging component orders, while new entrants in model development, edge-AI devices, and application-layer services are diversifying the opportunity set. This breadth of growth, they say, reduces concentration risk even as a handful of names dominate headline gains.

However, investors also caution that the path forward will not be linear. Competition is intensifying across semiconductor ecosystems, and governments are increasingly scrutinizing AI-related exports and national-security implications. Market volatility is expected to remain elevated as policymakers, regulators, and large technology firms negotiate the next phase of AI deployment. Still, institutional managers remain generally constructive, arguing that the secular demand for compute power, automation, and intelligent systems will keep the AI investment cycle resilient, even if short-term corrections occur along the way.