Megatrends reshaping global equities: Investing in the forces defining the future

Key takeaways

• Opportunity is broadening beyond the mega caps: Stronger earnings growth across a wider range of companies and markets is strengthening the investment case beyond the US technology leaders.

• AI’s next phase could create new winners: As AI moves towards deployment and monetisation, new beneficiaries are emerging – although questions remain over returns on today’s enormous spending.
• Mega IPOs could reshape the opportunity set: Potentially transformative businesses are reaching public markets, but compelling growth stories still need to stack up on fundamentals and valuation.
• Rewired supply chains are creating new profit pools: Trade barriers, regionalisation and greater emphasis on security are changing competitive dynamics and potentially benefiting companies in unexpected places.
• Electrification extends far beyond EVs and renewables: The continuing build-out is driving investment across power generation, grids, industrial equipment, semiconductors, batteries and other enabling technologies.

From artificial intelligence to electrification, powerful structural forces are reshaping global equity markets – challenging established market leaders and creating new potential sources of growth and return. But identifying a megatrend is only the beginning. For investors, the critical questions are where value will accrue, what is already priced in, and which companies are best positioned to benefit.

At our recent Megatrends in Global Equities Forum, Michael Feldman of ClearBridge Investments, David Morgan of Putnam Investments and Craig Cameron of Templeton Global Investments brought three distinct perspectives to those questions. They were joined by Simon Wood, former Head of Listed Markets at Brunel Pension Partnership, who brought an asset-owner perspective to the discussion. Michael Browne, Global Investment Strategist at the Franklin Templeton Institute, chaired the discussion.

1. Market concentration: Beyond the Magnificent Seven

After years of extraordinary dominance by the Magnificent Seven, is market concentration a structural risk – or could the next phase of returns come from a much broader range of companies?

Michael believes the Magnificent Seven have earned their dominance, having compounded earnings far faster than the rest of the market, supported by strong competitive advantages and balance sheets. He therefore does not see today’s concentration as a structural or systemic risk.

But there are signs of change. Only two of the Magnificent Seven outperformed the S&P 500 last year, while the earnings-growth gap with the other 493 companies is narrowing. AI, reshoring and other structural trends could broaden that growth further across companies and markets.

For David, concentration looks very different outside the US. By his calculation, technology and technology-like companies account for more than half of the S&P 500, compared with just 8% of the European market. That gives his bottom-up approach greater freedom to focus on companies the team fundamentally likes rather than owning large benchmark constituents simply for risk-management purposes. There are exceptions, notably South Korea and Taiwan, but he also sees encouraging signs of broader earnings growth – and from much lower valuations than in the US.

Craig offers a different perspective. Many of the Magnificent Seven sit at the heart of the megatrends driving markets, from AI to electrification, and their size alone is no reason to avoid them. For his thematic strategy, the question is whether individual companies can deliver the right balance of financial performance, impact, and valuation.

2. AI: From build-out to monetisation

AI is driving an investment cycle of extraordinary scale. But can the revenues and productivity gains ultimately justify the trillions being spent?

David believes the cycle remains relatively early, with rising hyperscaler spending continuing to support semiconductor manufacturers and the wider AI supply chain. But with several trillion dollars of further investment potentially ahead, the critical question is whether demand and revenues can grow enough to support the enormous amount of compute being built. Cheaper open-source models add another challenge: if they can deliver much of the capability of premium frontier models at a fraction of the cost, how many customers will pay for cutting-edge performance?

“Do you always need a Ferrari to drive to the grocery store?” — David Morgan

Michael is more confident about where future demand could come from. He sees AI moving from infrastructure build-out towards deployment and monetisation, with agentic AI potentially driving the next wave of adoption. Usage remains relatively early, leaving considerable scope for spending to increase as AI becomes more deeply embedded in businesses. That could broaden the beneficiaries beyond today’s “picks and shovels” into hyperscalers, software and new bottlenecks across the supply chain.

Craig sees a wide range of outcomes between an AI-driven productivity revolution and widespread capital destruction. Crucially, the hyperscalers funding much of the build-out are among the world’s most cash-generative businesses, giving them both the capacity and time to find where AI can generate sustainable returns.

3. Mega IPOs: Must know, not must own

As a new generation of potentially transformative businesses reaches public markets, how should investors balance access to future growth with the expectations already priced in?

For Michael, companies such as SpaceX and potential future listings including Anthropic warrant close attention. Their scale and disruptive potential mean investors need to understand their implications for existing holdings. But each still needs to pass the same tests of growth, fundamentals, and valuation.

“I don’t think they’re must-own stocks, but I think they are a must-know.” — Michael Feldman

Craig is similarly cautious, noting that abundant private capital means companies can stay private for longer and potentially come to market at demanding valuations. David sees the same distinction with SpaceX: it could become an extraordinary company by 2040, but that does not necessarily make it an attractive investment at today’s price.

4. De-globalisation: New barriers, new profit pools

As global trade continues to grow, are we really de-globalising – or simply seeing globalisation take a different shape?

Craig believes de-globalisation can be overstated: global trade is still growing, but geopolitical, regulatory and trade friction is creating new barriers. Those barriers can change the competitive landscape, allowing companies to prosper even when they are not the lowest-cost producers. He points to US solar manufacturing as one example, where restrictions on Chinese imports have created a protected “profit pool” for domestic production.

Michael sees similar effects as businesses duplicate supply chains to improve security and resilience. That can increase costs and inflation but also create new demand. Semiconductor manufacturing is one example, with additional capacity generating opportunities for equipment and automation providers.

David also sees the shift as less dramatic than expected. Companies are placing greater emphasis on supply-chain resilience and multiple suppliers, but wholesale relocation remains expensive and complex – and the economics can still favour existing supply chains even after tariffs. As a result, reshoring has so far been relatively limited.

5. Electrification: A quieter supercycle?

AI may dominate the headlines, but could an even bigger investment cycle already be taking place in electrification?

Craig points out that spending across electric vehicles and renewable energy is already greater than spending on AI. But growth in the trend does not necessarily translate into attractive investment returns: many EV manufacturers remain unprofitable, while soaring solar installations have created relatively little market value. The key, he argues, is identifying where the “profit pools” actually sit – including areas such as grids, cables and other enabling infrastructure.  

“Often the opportunity set doesn’t necessarily match the underlying trend.” — Craig Cameron

David approaches electrification from the bottom up rather than allocating to it as a theme. Rising demand from data centres, EVs and grid upgrades is creating opportunities in power generation, but he points to significant valuation differences even between similar businesses – reinforcing the importance of individual stock selection.

Michael takes a similar approach, finding potential beneficiaries across generation and transmission, batteries and power semiconductors. AI is adding to electricity demand but is only one part of a much broader structural trend.

Turning megatrends into investment opportunities

Recognising the forces reshaping the global economy is only the starting point. The investment challenge is determining how those trends should – or should not – translate into portfolio exposure.

From an asset-owner perspective, Simon highlighted the challenge of incorporating these exposures while retaining control of asset allocation and benchmark risk, suggesting a core-satellite approach as one solution.

David and Michael both emphasise fundamental stock selection, seeking to minimise unintended thematic, sector or factor risks. Craig deliberately takes greater thematic exposure through his climate strategy, but fundamental research and stock selection remain central to his approach.

That distinction matters. Megatrends can create powerful sources of growth, but not every company exposed to them will be a winner. Understanding where sustainable earnings growth can emerge, what is already reflected in valuations and which companies are best positioned to benefit can turn structural change into long-term investment returns.