No longer chasing after U.S. tech giants! Pimco fund managers, who outperform 97% of their peers, are now betting on Asian AI winners.

A top fund manager at the Pacific Investment Management Company (Pimco) is betting that the next winners of the artificial intelligence (AI) boom will emerge outside the crowded landscape of major U.S. tech stocks, shifting investments toward Asian equipment suppliers, Chinese financial stocks, and healthcare stocks. Fund manager Emmanuel Sharef oversees Pimcos flagship 60/40 Balanced Income and Growth Fund. Data shows that this nearly $19 billion fund has outperformed 97% of its peers over the past three years. Emmanuel Sharef noted that the appeal of many large tech companies in the U.S. has diminished as soaring AI expenditures increase debt burdens and create more uncertainty for corporate earnings outlooks. In an interview earlier this week, Emmanuel Sharef stated, Currently, we are underweight most hyperscalers and also most of the 'Seven Giants' because their valuations are very high. You dont necessarily have to hold the most highly valued stocks to capture a certain theme or market trend. The fund employs a systematic strategy based on value, quality, momentum, and growth when selecting individual stocks. Nonetheless, this adjustment reflects a growing skepticism on Wall Street regarding whether elevated valuations and soaring AI expenditures are sufficient to sustain further gains in the stock market. Amid geopolitical tensions, rising oil prices, and stubborn inflation putting pressure on the markets, some investors are turning to lower-valued sectors in search of returns. Emmanuel Sharef indicated that Pimco remains overweight in the Asian market due to strong profit growth among Asian companies and their exposure to downstream firms in the AI supply chain. He expects this investment belief to persist as long as profit growth remains robust. He remarked, The scale of AI capital expenditure is enormous. This translates to substantial demand for semiconductor chip components, cooling equipment, cable interconnections, optical equipment, power supplies, construction equipment, metals, and everything else needed to build data centers. The fund also has a positive outlook on the biotech and life sciences sectors. Over the past 18 months, Pimco has been steadily increasing its investment exposure in this area. Emmanuel Sharef mentioned, Some of the upward revisions in earnings expectations reflect increased M&A activity in the industry as large biotech companies have been trying to diversify their drug development pipelines. Given the advancements in the AI field, there is potential to cure more varieties of diseases through the application of this technology in the future. In China, the fund's largest sector exposure is in financial stocks, largely due to their relatively low volatility. He is also optimistic about materials stocks. The MSCI China Materials Index has risen approximately 7.1% over the past month, outperforming most major industry sectors. With rising gold and copper prices, this sector, which has underperformed this year, has turned into one of the market leaders. Emmanuel Sharef stated, Whether its data center construction or rare earths, Chinas resource extraction and materials companies are quite significant.