At last week's Modern Investor Summit in London, one theme kept coming up: the artificial intelligence trade is far from over. Despite worries about high interest rates, energy bottlenecks, and the enormous sums being poured into AI infrastructure, the underlying demand for computing power continues to surge. And for two of the biggest names in the space—Microsoft and Nvidia—that demand is opening a fresh window of opportunity.
Why the AI trade still has legs
The AI boom has driven a massive build-out of data centers, chips, and cloud services over the past couple of years. Many investors have wondered whether the spending is sustainable, especially as central banks keep borrowing costs elevated. But the evidence so far suggests that companies are still scrambling to secure the computing capacity they need to train and run AI models.
That persistent demand is the key reason the trade appears to have more room to run. When a technology cycle is driven by genuine, broad-based need—rather than speculation—it tends to last longer than skeptics expect. The current cycle looks more like the early days of the internet or the smartphone era than a short-lived fad.
Microsoft: the cloud and AI powerhouse
Microsoft has positioned itself at the center of the AI wave through its Azure cloud platform and its partnership with OpenAI. The company's cloud business is a direct beneficiary of the surge in demand for AI computing, as businesses of all sizes rent processing power rather than build their own infrastructure.
For everyday investors, Microsoft's appeal lies in its scale and diversification. It's not just an AI play—it also has steady revenue from software, gaming, and enterprise services. That mix can make it a less volatile way to gain exposure to AI growth while still collecting dividends.
Nvidia: the chip maker at the heart of the boom
Nvidia has become the poster child for AI infrastructure. Its graphics processing units (GPUs) are the industry standard for training large language models and running AI workloads. The company's chips are in such demand that customers often face long lead times.
That pricing power has translated into spectacular revenue growth, but it also raises a question: how much of the future is already priced into the stock? Interestingly, despite the huge run-up in Nvidia's share price, its valuation—when measured against expected earnings—remains more reasonable than many investors assume. That's because earnings have grown almost as fast as the stock price.
What could derail the trade?
No investment story is without risks. For the AI trade, the biggest near-term threats are higher-for-longer interest rates, which can compress valuations, and energy constraints. Data centers consume vast amounts of electricity, and in some regions, power availability is becoming a limiting factor. That's one reason we're seeing tech giants exploring nuclear power deals to secure reliable energy for their AI operations.
There's also the question of whether the hundreds of billions being spent on AI infrastructure will eventually deliver returns that justify the outlay. If the technology fails to produce profitable applications at scale, some of that spending could be seen as wasteful. But so far, the adoption curve suggests that businesses are finding real uses for AI, from coding assistants to customer service chatbots.
What it means for investors
For the average investor, the key takeaway is that the AI trade isn't just a momentum story—it's backed by strong fundamentals. Demand for computing power is still booming, and valuations, while not cheap, are not stretched to bubble levels either. That combination suggests there may be more upside ahead.
That said, it's important to remember that no stock is a sure thing. Microsoft and Nvidia are both large, well-established companies, but their fortunes are tied to the broader tech cycle. Investors should consider how these stocks fit into their overall portfolio and risk tolerance, rather than chasing recent performance.
The AI infrastructure build-out is also having ripple effects across other sectors. For instance, copper prices have been climbing partly because of demand from data centers and renewable energy projects. And tech stocks are seeing renewed interest in markets like Hong Kong, as investors look for ways to play the same theme.
The bottom line
The AI trade has been one of the defining investment stories of this decade, and the evidence from the Modern Investor Summit suggests it still has plenty of fuel. Microsoft and Nvidia, each in their own way, are well positioned to benefit from the ongoing demand for computing power. For investors, the window may still be open—but as always, it's wise to enter with eyes open and a long-term perspective.
