Don’t cash in your chips yet, the AI boom still has a long way to run

2 weeks ago 4

By Billy Leung

November 19, 2025 — 5.00am

While some AI-sceptics are claiming the current boom in US sharemarkets is overhyped, the reality is the US technology giants represent some of the most profitable companies in the world, with their huge price gains underpinned by strong earnings growth.

Today, almost all digital applications require data software, storage and computer chips. That is propelling the earnings of the world’s largest technology companies, most of which are listed on US stock exchanges and enjoying rising profits.

Investors may be wise to consider including tech leaders like Nvidia in their portfolios, as they may get bigger and more profitable over time.

As the chief executive of computer chipmaker AMD Lisa Su put it this month: “The demand for compute has never been greater as every major breakthrough in business, science and society now relies on access to more powerful, efficient, and intelligent computing”.

Reflecting the digital boom, AMD shares have surged around 110 per cent in the six months to November 17, bolstered by record profits and a new deal with OpenAI for sales of its advanced computer chips, or graphics processing units (GPU), which are essential to run AI.

Now, the focus turns to Nvidia, ahead of its earnings report this week.

Market leader in GPUs, Nvidia, is now the biggest company in the world, recently surpassing a market capitalisation of $US5 trillion ($7.7 trillion) as demand for its advanced computer chips soars, though it has since dropped back.

These US technology giants are exceptionally profitable, with robust margins, scalable business models and strong balance sheets.

Nvidia recently said it has booked sales of over $US500 billion of its graphics processing units (GPUs), which were once used for gaming. Today, they are integral to AI processing. Nvidia’s shares have rallied around 38 per cent for the six months, unpinned by its huge profitability and earnings growth.

Apple’s market capitalisation also recently rose above $US4 trillion for the first time as the company rung up record iPhone sales, on which many of us access AI tools and other digital apps.

Apple overtook Microsoft in size, to become the second-biggest company in the world, after announcing record revenue in the first quarter of FY 2025-26 of just over $US1 billion, pushing its shares to a record high of US$277, having gained around 28 per cent in six months.

Alphabet too has hit significant milestones. The Google-owner recently announced AI-driven cloud boom pushed its quarterly revenue past $US100 billion for the first time, in the first quarter of FY25-26. Shares in the owner of the ubiquitous apps, Gmail, Chrome, Gemini, and Google Meet, reached a fresh record high at $US291.59 and have rallied around 70 per cent in six months.

Chipmaker Broadcom booted Meta to become the 6th biggest company in the world and for good reason; more than 99 per cent of all internet traffic crosses at least one Broadcom computer chip.

The company has joined up with Alphabet and OpenAI to make custom computer chips for both and its shares have risen 41 per cent in six months, also buoyed by record profits. On some estimates, OpenAI’s deal with Broadcom alone could generate $10 billion in revenue by 2027, potentially scaling from $40 billion to $50 billion annually thereafter.

These US technology giants are exceptionally profitable, with robust margins, scalable business models and strong balance sheets, which could keep getting stronger in this digital age.

On 2026 estimates, Apple and Nvidia are forecast to deliver returns on equity (ROE) of around 175 per cent and 90 per cent in financial year 2025-26, respectively, while Meta, Alphabet, Microsoft and ServiceNow sit comfortably above the S&P500 average of roughly 20 per cent.

Jensen Huang, the chief executive of Nvidia.

Expectations for these companies’ earnings growth are similarly strong. Over the next three years, earnings per share (EPS) for the broader FANG (Facebook, Amazon, Netflix, Google) universe are projected to rise faster than the overall market, with Nvidia and Broadcom expected to compound at around 35 per cent to 40 per cent a year, while the EPS of Netflix, ServiceNow, Microsoft and Amazon are all forecast to grow in the high teens to low twenties.

This group of companies features strong structural growth prospects with consistent profitability, which is rare in global equities. Investors may be wise to consider including these tech leaders in their portfolios, as they may get bigger and more profitable over time.

Outside the US, computer chip manufacturer Taiwan Semiconductor Manufacturing Company – the world’s largest dedicated semiconductor foundry with clients including Apple, AMD, and Nvidia – is also climbing the global market capitalisation ladder quickly. TSMC is now the ninth largest company in the world after also recently overtaking Meta, with its shares up 47 per cent in six months.

Ten years ago, Nvidia, Broadcom, and TSMC, were nowhere near the world’s top 10 largest companies; now, chip companies account for at least three as the demand for computing power grows.

Australian investors still have time to ride the digital boom, and some have already caught on. Assets under management (AUM) for Global X’s FANG+ ETF have attracted near record inflows of $315 million this year on the ASX and that is set to surpass total inflows of $349 million in 2024.

With total AUM of $1.69 billion as at October 31, FANG+’s AUM could soon surpass $2 billion as investors buy into the profitability of the US tech giants in a single trade.

Billy Leung is a senior investment strategist at Global X.

Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their personal circumstances before making any financial decisions.

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