BlackRock Investment Institute has held strong in its US overweight this week despite the AI model release from DeepSeek, focusing on a broadening benefit of AI as adoption of the technology continues.
Currently, BlackRock believes that AI remains in its ‘buildout’ phase, which it believes will be followed by an ‘adoption’ and ‘transformation’ phase, which could bring further benefits to the market.
While the DeepSeek innovation has brought questions about capital expenditure for AI, BlackRock said that more funds are likely needed to continue developing the technology. As of 2024, the capital investment made by the magnificent seven is almost equal to US government research and development, nearing $250bn each.
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Jean Boivin, head of the BlackRock Investment Institute, said: “Beyond the buildout phase, we have yet to see the adoption phase begin in earnest, even with more players in the mix. Yet the rise of new AI models signals we could move through AI’s phases quicker than anticipated, especially if efficiency gains from those models are indeed significant.
“Efficiency gains could ease earlier market fears that AI capacity won’t keep up with rising demand. The spread of simpler, cheaper AI models could spur wider adoption by companies that need greater transparency over AI’s output.”
BlackRock tracks the transition to the adoption phase by keeping a pulse on job sectors where a large portion of the workforce would be aided by AI efficiency. However, Boivin said the ‘winners’ will come through who is able to capture revenue.
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“One possible outcome: the big tech players now powering the AI buildout could reap most of the benefits. Yet last week’s developments show there is another path: cheap, efficient and commoditised AI models that could benefit AI’s end users instead of big tech. Across all three phases, following the revenue helps us to uncover investment opportunities,” Boivin said.
Buildout will also have to contend with geopolitical tensions, as the US and China struggle for control. BlackRock Investment Institute holds an overweight in both China and the US. So far, the US had looked to safeguard its innovation through restrictions to China on advanced tech and hardware.
“DeepSeek’s apparent breakthrough has raised questions for some about the effectiveness of this approach. The new administration has emphasised AI leadership is key for US economic and national security. We expect a continued focus on export controls, data security and concentrating the AI buildout in the US,” Boivin said.
This story was written by our sister title, Portfolio Adviser
