US tech giants are spending hundreds of billions of dollars on AI-related moves, and much will ride on whether earnings justify the sales hype. Previous investment booms – such as the railroads after the US Civil War – led to bankruptcies. Brunner Investment Trust managers examine the investment terrain.

Companies plan to spend hundreds of billions of dollars on AI capital spending – driving a likely major rise in electricity generation in coming years – but there are serious questions of whether returns will match the billing, a fund management firm has said.

In 2025-26, capex in the artificial intelligence space is slated to be in the region of $450 to $500 billion. Return on invested capital is about $13 billion. Actual returns are far off justifying the outlays, requiring a massive revenue growth becoming reality, Julian Bishop, co-lead portfolio manager of the Brunner Investment Trust, a UK trust, told journalists at a recent media briefing attended by WealthBriefing. 

The sums in play are “an extraordinary amount of money to be spending,” he said. “There has to be a huge amount of [revenue] growth for this AI spending to be worth it.”

“For the US stock market to continue to flourish, AI must live up to the hype,” he said.

The 10 largest firms by market capitalisation, heavy with technology giants, account for 40 per cent of the total (S&P 500 Index), he said. A possible trigger for a correction to stock prices will be if one of the major AI-related players (Google, Microsoft, Nvidia, etc) talks about a pause or even reduction to capex, Bishop said.

The numbers are starting to set off alarms. Analysts fret that the scale of capital spending on AI surpasses the US internet and railroad booms of the 20th and 19th centuries, respectively. While these booms did leave the US with a vast network of rail and internet links, creating considerable economic benefits, the immediate investors in the sectors nursed losses. Arguably, this is an inevitable result of entrepreneurs seeking to win in a crowded field. There is also the “Fear of Missing Out” factor – a point that comes from behavioural finance.

Kai Wu, who wrote an October 2025 research paper Surviving the AI Capex Boom, (source: Sparkline Capital, 22 October 2025), says that [investment in] AI is greater than the internet boom’s peak relative to GDP. When adjusted for the shorter useful life of AI chips versus physical infrastructure, AI spending is greater than the railroad building phase of the 1860s to 1870s. The report said: “The parallels to past technology buildouts are hard to ignore. In the late 1990s, telecoms, such as Global Crossing and AT&T, spent over $500 billion laying fibre optic cable in anticipation of rapid Internet adoption. However, their projections proved over optimistic, leaving the industry to suffer for years amid a glut of capacity and collapsing prices.”

Brunner Trust’s Bishop said regardless of the specifics, AI-adjacent areas such as electricity generation and sectors that benefit from automation via AI are investment areas to consider.

“Electrification will be a core theme in the coming decade,” he said. Bishop noted that after holding steady for years, electricity generation in the US is starting to rise, in part because of the AI factor. For example, an area to look at are makers of high-voltage systems, transformers and grids.

The trust has significant holdings in Big Techs that play – in part – to the AI theme. As of its July 2025 factsheet, Microsoft is the top holding (7.2 per cent), with Taiwan Semiconductor at second (4.0 per cent). Visa, the credit card business, is third (3.8 per cent), and Alphabet is fourth, 3.4 per cent. Other firms in the mix include Auto Trader, Charles Schwab, Bank of Ireland, InterContinental Hotels, TotalEnergies, Shell, Aena (the airports group) and ASML (Dutch silicon chip lithography firm). Sector-wise, information technology is the largest holding area (27.7 per cent), followed by financials (22.5 per cent), and industrials (21.3 per cent).

Over five years, the net asset value (NAV) of the trust has risen 90 per cent, it rose 6.6 per cent in the past year; the benchmark is up 89.2 per cent and 12.8 per cent, respectively. The benchmark is 70 per cent of the FTSE World ex-UK Index and 30 per cent of the FTSE All-Share Index. The trust has a 0.45 per cent annual management fee, and no performance fee. The trust, which was launched in December 1927, had £654 million ($854 million) of total assets as of July.

European banks in favour
Switching sectors, Bishop and his colleague, James Ashworth (senior portfolio manager) were asked why the Brunner trust held a number of European banks, such as Bank of Ireland (mentioned above) and DNB Bank, the Norwegian bank. European banks’ shares have, in broad terms, fared well in 2025 amidst their perceived attractive values and restructuring after years of challenging finances, plus the boosting impact of rising infrastructure/defence spending in the region. Shares in some lenders have risen rapidly since the start of 2025. The stock price of Societe Generale, for example, has more than doubled. At DNB Bank, shares are up about 16.7 per cent this year and Bank of Ireland’s have surged by 63.8 per cent.

Asked about some of the continued travails of banks – such as lawsuits and regulatory actions on UK banks (motor finance sales practices) and France’s BNP Paribas (Sudan), Bishop that such legal risks do seem to be a feature of European banking. Ashworth said the trust focuses on banks in “sensible, well-regulated markets.” Another positive feature for banks in the past 12 months has been the lack of a significant drop in eurozone interest rates, as had been predicted. “Credit losses have [also] been much better than anticipated...Even the larger UK banks have done really well,” he said. (See here and here for results from Barclays and NatWest, respectively, for example, showing that investors are relatively relaxed about certain impairments.)

Bishop concluded by noting that in overall asset allocation terms, the trust is slightly underweight US equities. The American market is expensive and the trust, in seeking opportunities, will tend to prefer non-US examples if they arise, he said.