Skip to main content
UK - Financial Adviser
Select Region Select User Type
  • Global
    • Home
  • UK Investors
    • Financial Adviser
    • Private Investor
  • International Investors
    • Private Investor
    • Professional Investor
  • Fund Centre
    • Our Funds
      • Equities
        • Rathbone Global Opportunities Fund
        • Rathbone Greenbank Global Sustainability Fund
        • Rathbone Income Fund Fund
        • Rathbone UK Opportunities Fund
      • Fixed Income
        • Rathbone Ethical bond Fund
        • Rathbone High Quality Bond Fund
        • Rathbone Strategic Bond Fund
        • Rathbone Greenbank Global Sustainable Bond Fund
      • Multi-Asset
        • Rathbone Greenbank Multi-Asset Portfolios
        • Rathbone MULTI-ASSET PORTFOLIOS
      • Sustainable
        • Rathbone Greenbank Global Sustainable Bond Fund
        • Rathbone Greenbank Global Sustainability Fund
        • Rathbone Greenbank Multi-Asset Portfolios
    • Literature Library
    • Consumer Duty
    • Prices and Performance
    • Glossary of Terms and FAQs
  • Strategies
    • Equities
    • Fixed Income
    • Multi-Asset
    • Sustainable
  • Our Clients
    • Private Investor
    • Financial Adviser
    • International Private Investor
    • International Financial Adviser
  • Rathbones
  • Global Home
  • Insights
    • Fund Insights
    • In the know blog
    • Review of the week
    • The Sharpe End podcast
  • About us
    • About us
    • Our People
    • Awards
    • Media centre
    • Responsible Investing at Rathbones
  • Contact
Home Home

Search

  • Fund Centre
    • Our Funds
      • Equities
        • Rathbone Global Opportunities Fund
        • Rathbone Greenbank Global Sustainability Fund
        • Rathbone Income Fund Fund
        • Rathbone UK Opportunities Fund
      • Fixed Income
        • Rathbone Ethical bond Fund
        • Rathbone High Quality Bond Fund
        • Rathbone Strategic Bond Fund
        • Rathbone Greenbank Global Sustainable Bond Fund
      • Multi-Asset
        • Rathbone Greenbank Multi-Asset Portfolios
        • Rathbone MULTI-ASSET PORTFOLIOS
      • Sustainable
        • Rathbone Greenbank Global Sustainable Bond Fund
        • Rathbone Greenbank Global Sustainability Fund
        • Rathbone Greenbank Multi-Asset Portfolios
    • Literature Library
    • Consumer Duty
    • Prices and Performance
    • Glossary of Terms and FAQs
  • Strategies
    • Equities
    • Fixed Income
    • Multi-Asset
    • Sustainable
  • Our Clients
    • Private Investor
    • Financial Adviser
    • International Private Investor
    • International Financial Adviser
  • Rathbones
  • Global Home
  • Insights
    • Fund Insights
    • In the know blog
    • Review of the week
    • The Sharpe End podcast
  • About us
    • About us
    • Our People
    • Awards
    • Media centre
    • Responsible Investing at Rathbones
  • Contact
Home

Search

Artificial returns?

The resilience of stock markets in the face of a banking crisis and potential recession is perplexing many investors – Rathbone Global Opportunities fund manager James Thomson included. He wonders whether the promise of AI might have something to do with it.

12 May 2023

Virtually everyone you talk to is bearish. The future is uncertain. Inflation isn’t falling as fast as everyone would like. Costs from labour to debt interest payments are rising. Central bankers are like a riddle of sphinxes.

And yet, stocks are comfortably up year to date, particularly the digital titans of America: Microsoft, Alphabet, Apple and Amazon, all of which we own, and Meta and Telsa, which we don’t.

Markets don’t rise by themselves. They rise because investors bid them higher. They rise because – after all the caveats, consternation and short-term doubts – more people think stocks offer good value than not. It’s the old principle of revealed preferences: the best way to judge what people really think is to see what they buy, not listen to what they say.

It would be easy to explain the outperformance of tech stocks as simply a bounce-back of the interest-rate sensitive ‘growth’ stocks that were laid low in 2022 by rapidly rising interest rates. However, not all of the growth darlings have shot the lights out, and the largest movers seem to be in the digital space. I think part of the uplift in tech stocks may be explained by the promise of profits from the spread of Artificial Intelligence (AI).

One of the largest gainers so far this year is Nvidia, whose price has doubled year to date. This is a volatile stock – it’s still about 10% below its 2021 peak. It has definitely been a wild ride for us, as long-time holders. Nvidia designs graphics processing units (GPUs), which were created for computers to run 3D graphics. For the last couple of decades, rapid progress was driven by the demand for increasingly realistic graphics in computer games. However, in recent years high-powered GPUs have become integral to blossoming AI. Nvidia is known for making the best GPUs in the business (see the chart below), which may explain why its share price has soared along with the profile of AI programs such as ChapGPT and Alphabet’s Bard. ‘Accelerator’ GPUs are crucial for speeding up computing power to handle AI.

Accelerator-based GPU market share by company

Chart JT

Source: Liftr Insight, Jefferies. More current and detailed data available by Liftr Insights; Nvidia (NVDA), Xilinx (XLNX), Amazon Web Services (AWS), Google Cloud (GCP).

It’s not all without risk, though. This is new ground and there’s always a chance that a market leader will be overtaken by a rival. Also, there’s actually excess inventory in GPUs after production increased a year or so ago to clear a chronic shortage for gaming consoles and computers during the pandemic.

Our exposure to this AI is via the largest tech companies, and ‘picks and shovels’ – the tools of the goldrush – rather than through riskier start-ups seeking to strike gold. It’s hard to quantify the size of the future revenue contribution of AI (perversely that’s usually when you harvest the best returns), but the likely pause in interest rate hikes has probably triggered a return of ‘growth’ stock outperformance, led by these sorts of businesses with AI opportunities.

Most popular blogs

29 February 2024

Nvidia: from pastime to new paradigm

A business created to make computer game graphics more beautiful stumbled into driving AI, one of the most important technologies of the 21st century. Rathbone Greenbank Global Sustainability Fund manager David Harrison explains what all the fuss is about.

Find out more

5 mins

4 December 2024

Why active management has a place in 2025 and beyond

The rise of passive investment is storing up risks that many investors may not realise they are taking. James Crossley, our head of Rathbones Asset Management distribution, makes the case for active managers.

Find out more

3 mins

9 January 2024

2024: The Year. Maybe?

Our head of multi-asset investments David Coombs starts the new year making a three-point turn with a dump truck of salt. Behold, we have his predictions.

Find out more

3 mins

18 January 2024

Ceasing to worship at the altar of stock-pickers

Back in secondary school, our head of multi-asset investments David Coombs was a champion stock-picker. Although, he had help from his teacher’s direct line to the market – which taught him markets tend to be unfair.

Find out more

4 mins

In The KNOW blog

Read the latest news and views from our fund managers

Blog posts

Subscribe to the In The KNOW blog

You can unsubscribe at any time. For details on how we handle your data, visit our Privacy policy.

CAPTCHA

Let's Talk

Ready to start a conversation? Please complete our enquiry form, we look forward to speaking with you

Enquire
  • Important Information
    • Brexit Statement
    • Important information
    • UK Modern Slavery Act
    • Accessibility
    • Privacy
    • Cookies
    • Cookie preferences
    • Complaints
  • Important Information
    • Consumer Duty
    • Voting disclosure
    • Assessment of value reports
    • TCFD Reports
    • SDR Consumer-Facing Disclosures
    • Financial Ombudsman Service
    • Financial Services Compensation Scheme
    • Glossary of terms and FAQs
    • MIFIDPRU8
Address

Rathbones Asset Management
30 Gresham Street
London
EC2V 7QN

Rathbones Asset Management Limited is authorised and regulated by the Financial Conduct Authority and a member of the Investment Association. A member of the Rathbone Group. Registered Office 30 Gresham Street, London EC2V 7QN. Registered in England No 02376568.

© 2025 Rathbones Group Plc
Incorporated and registered in England and Wales. Registered number 01000403

Follow us
LinkedIn
City Hive Logo
ACT Logo

Rathbones Asset Management is delighted to be an early signatory of the ACT Framework created by City Hive

Diversity Project Logo

Rathbones Asset Management is a member of The Diversity Project

The value of your investments and the income from them may go down as well as up, and you could get back less than you invested.