Alec Cutler, portfolio manager of the Orbis Global Balanced Strategy, shares his insights on artificial intelligence, and why he favours the infrastructure and commodities that go into it as well as semiconductors.

There are many voices shouting the odds about the outlook for AI, but what sort of companies are most likely to benefit from it - and where will this leave investors? At a media event in London last week, Alec Cutler, portfolio manager at Orbis Investments, outlined the top stocks associated with the AI trend.

In line with a number of investment managers, Cutler said AI data centres are exceptionally hungry for energy and water resources. Consequently, he sees investment opportunities in Pennsylvania Natural Gas, a neglected and undervalued stock. He believes that it is one of the best places to locate a data centre because it needs to be near population centres and energy. Cutler plans to continue investing in AI-related firms as long as US tech multinationals such as Nvidea and Alphabet continue to invest in it. He has no direct exposure to oil, but plans to continue investing in natural gas, until nuclear takes over.

Although AI data centres' hunger for energy resources could slow down the growth of AI, Cutler noted that the need for large amounts of water has now been resolved due to more efficient systems.

Cutler also invests in South Korea-based Samsung Electronics, the largest global producer of DRAM chips which has benefited from the price increase of DRAM and NAND flash memory chips – driven by demand for generative AI.  Another holding is the Taiwan Semiconductor Manufacturing Company (TSMC) which supplies Nvidea with chips, although he has trimmed it down recently. He also invests in Barrick Mining, a gold and copper producer which is essential for artificial intelligence. Barrick has mining operations in Argentina, Canada, Chile, Saudi Arabia, Zambia and the US, amongst others.

Orbis has European headquarters in London. A global firm, its main HQ is in Hamilton, Bermuda and maintains offices in cities such as Tokyo, Hong Kong, San Francisco and Sydney.

Orbis Global Balanced Strategy
Cutler manages the Orbis Global Balanced Strategy, a UK OEIC, which has outperformed the bench mark over a five-year period.

The fund aims to balance investment returns and the risk of loss by using a diversified global portfolio. To do this, it primarily invests in shares of publicly-listed companies and bonds issued by companies and governments located anywhere in the world. It can also indirectly invest in commodities. It targets outperformance of the returns of its benchmark, 60 per cent MSCI World Index with net dividends reinvested and 40 per cent JP Morgan Global Government Bond Index (hedged into sterling).

Holdings include South Korea-based Samsung Electronics and TSMC. Another top holding is the Prysmian Group, a multinational manufacturer of underground and submarine cables and systems for power transmission and distribution. They also include Barrick Mining, iShares Physical Gold, UK construction and infrastructure company Balfour Beatty and UK-based Drax, a renewable energy company.