One of the reasons for the current rally is that there are many non-tech-savvy fund and asset managers sitting on trillions of dollars in assets that are slowly realising AI exists.
These people literally learned about Claude or agents in the last few weeks. And maybe even tried them.
And got an awakening.
To understand why that matters, you need to realise that the âaverage asset managerâ in the UK or EU is barely able to turn on his computer. They have an âIT support guyâ for that. They couldnât tell you Windows from MacOS. Yet they manage $ trillions of pension assets on.
These people are always late to every trend. But every trend, they eventually join.
And they only now discovered that AI exists, and what it actually does. That âAIâ is not just being an irritating chatbot in their âWindowsâ on âOutlookâ on the big HP desktop in their office.
Itâs also genuinely very hard for them to understand the growth rates, the incredibly high GAAP operating margins, and the relatively low P/E valuations in the semiconductor sector (low vs all other growth tech).
You see, in the past, every sector with dramatic growth had terrible, extremely negative margins (see SAAS, e-commerce, renewables, anything in the 2021 SPAC bubble, etc). Profits were always promised to âcome laterâ, and usually, they never actually did.
Meanwhile, we now have a cloud and semiconductor sector thatâs incredibly high growth, yet also has extraordinary margins and cash flows not seen anywhere else in the business world, anywhere. Ever.
In financial and economic terms, itâs simply unprecedented.
Theyâve never seen numbers like this, so itâs mentally very hard for âthe average asset managerâ to grasp them.
Now, theyâre seeing the use cases. The output. Theyâre seeing the numbers.
And theyâre waking up.
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