Brian Kersmanc of GQG Partners says his decision to scale back exposure to major technology stocks more than a year ago is beginning to deliver results, despite initially lagging during the height of the AI-driven rally, according to a report by Bloomberg.

Kersmanc had moved out of the sector after concluding that enthusiasm around artificial intelligence — partly challenged by lower-cost offerings from China’s DeepSeek — had become overstated. While that stance caused his funds to miss last year’s sharp gains in tech, he now believes concerns about the sustainability of heavy AI-related spending are starting to validate the strategy.

Investors are increasingly scrutinising whether the rapid, debt-backed expansion of AI infrastructure — including data centres and advanced chips — can generate sufficient returns. Questions are also emerging around pricing pressures in areas such as memory chips and cloud computing.

Performance at GQG has shifted accordingly. The Goldman Sachs-distributed GQG Partners International Opportunities fund has rebounded from weaker rankings in 2025 to sit among the top performers in early 2026, driven by allocations to sectors such as utilities and consumer staples.

Kersmanc remains cautious on large technology companies, particularly hyperscale cloud providers, arguing that capital expenditure requirements are rising sharply while profitability may come under pressure. He expects intensifying competition to drive down the cost of AI computing services, potentially eroding margins for firms including Amazon’s cloud division and newer entrants.

This more sceptical view reflects a broader split among investors over the durability of the AI-led market rally. Major technology firms are collectively expected to commit hundreds of billions of dollars to infrastructure this year, even as tech-heavy indices have started to underperform the wider market in 2026.

Kersmanc also remains wary of software companies, noting that while some firms with proprietary data may prove resilient, concerns about AI disruption and high levels of share-based compensation continue to weigh on the sector’s appeal.

Instead, he is favouring more defensive and cash-generative industries. Within utilities, holdings include companies such as Duke Energy and NextEra Energy. In consumer staples, he highlights opportunities in Nestlé, citing ongoing brand improvements, as well as Kroger, which he views as more attractively valued than peers like Walmart and Costco.