Where will the chips fall?

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Articles by Oliver

Oliver Shale

Investment Specialist, US | Ruffer LLC registered representative

10 September 2026

For an absolute return manager, the dominance of the AI build-out narrative and the popularity of AI-related stocks pose a tricky question. How can you gain exposure to a powerful capex cycle without taking on too much crowding risk? One way: consider where the spoils of the AI boom may be spent next.

The ‘wealth effect’ is one means of transmission to the wider economy. US households derive a record amount of their wealth from stock markets, so equity prices can have an outsized impact on how well-off people feel and their propensity to spend. With markets at historical highs and concentrated on companies leading the AI build, the scale of wealth creation in this cycle has been staggering. This may next support recreational spending in non-tech sectors, such as travel and luxury retail.

Whilst the impact of this is contested and difficult to measure, more visible is the extreme profitability that AI infrastructure spending is driving across parts of the supply chain. And it’s not just paper wealth; performance bonuses, profit-sharing agreements and blockbuster IPOs are creating large income gains.

Many Asian companies are at the epicentre of this dynamic. South Korean semiconductor company SK Hynix was set to pay average bonuses of nearly $500,000 per employee this year. Samsung has since agreed to a similar outlay after the company’s labour union threatened to strike. As a result, the Bank of Korea estimated that retail consumption in regional semiconductor hubs is already running well above the national average.

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It’s no secret that memory chip companies are experiencing soaring demand and profits. Perhaps the more interesting question for a valuation-conscious investor is where these gains will be spent. Historically, swings in demand for high end goods have been closely linked to wealth creation, often originating from East Asia. Companies in sectors such as European luxury goods and hospitality are therefore well placed to benefit from this cash accumulation. As this month’s chart makes clear, profits are already showing up in national accounts, and we can expect household consumption to follow.

In the US, the spoils of the boom are also grabbing headlines. Mega IPOs have minted fortunes for employees and founders, whilst data centre developers are paying large sums to rural landowners. Morgan Stanley’s wealth management business said that over half of its $148 billion of new assets in the second quarter of 2026 came from recent IPOs, helping the division generate record net revenues.

In tech-heavy regions such as the San Francisco Bay Area, investment advisors are recruiting aggressively with the prospect of managing future windfalls, and the impact is already being seen in sectors like the luxury housing market. So far, the effects are localised, but it’s reasonable to expect some of the spending to make its way into broader consumer-sensitive sectors.

Global capex growth has been dominated by IT spending, much of which has come from the hyperscalers. As the building of data centres continues, this could broaden out into higher demand for other industrial goods. For companies making electrical parts and cooling components, earnings expectations have already skyrocketed. If the build out drives non-tech investment and employment in the US, the effects could spill over into higher incomes and household spending, just as in South Korea.

Thinking about what companies are exposed to the second-order benefits of AI-related wealth creation is one way we are building asymmetry into our equity portfolio. We believe these profits could show up next in consumer-sensitive sectors such as retail, luxury goods, travel and hospitality, home improvement and asset management.

There are of course reasons to be cautious. The cycles discussed above can work in reverse. Falling tech valuations and AI capex retrenchment could squeeze the rest of the economy. Meanwhile, the consumer is still facing headwinds, such as a higher cost of living and periodic energy price spikes.

The Ruffer portfolio is well protected against these risks but, while markets are rallying, we are also seeking to identify the next beneficiaries of the current capital cycle that are not yet priced for it. With some forecasting AI-related capex to top $1 trillion in 2027, the broadening out dynamics could well continue.

#regime change, #technology

Articles by Oliver

Oliver Shale

Investment Specialist, US | Ruffer LLC registered representative

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Piers Wheeler

Director – Institutional

T +44 (0)20 7963 8258

Developing and executing asset management strategy for capital raising and strategic relationship management. Coverage includes EMEA, Asia and Australia. Piers joined Ruffer in 2021, having previously worked with asset management firms including Eastspring, AMP Capital and LEK as a strategic consultant. He holds a MA from the Bayes Business School and a BA (Hons) from the University of Oxford.

Annabel Paterson

Senior Associate – Institutional

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Joined Ruffer in 2021, having graduated with a first class honours degree in land economics from the University of Cambridge. After two years working with the UK Private Wealth team, she now supports Ruffer’s global business development and client servicing efforts. She is a CFA charterholder.

Articles by Annabel

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