Investing in AI: A Strategic Guide for Financial Advisors

Artificial intelligence is transforming the world of investing. To find opportunities and stand out from the competition, financial advisors need to stay informed on the evolving industry. 

When you have a deeper understanding of how to invest in AI, it can be easier to identify the right AI stocks and improve your business. Here are key insights to consider. 

Electrical equipment suppliers have emerged as the biggest winners from the surge in AI-driven investment, capturing the most revenue from data centers within the capital goods sector. Schneider Electric leads the pack with approximately $9.5 billion in data center revenue, which is more than 50% higher than its nearest competitor.  

For a deeper look at how AI investment is reshaping the capital goods landscape, download the full Powering Artificial Intelligence report. 

Vertiv ranks second and is the closest to a pure-play data center supplier, with more than three-quarters of its revenue coming from this market. Beyond electricals, exposure to data center spending is limited mainly to thermal and backup power providers such as Carrier, Johnson Controls, Trane, Daikin, Caterpillar, and Cummins. 

Data center construction has soared since the launch of ChatGPT, with spending reaching a record seasonally adjusted rate of $40 billion in June 2025, up 30% year-over-year following a 50% increase in 2024. Data centers now account for 40% of US office construction, up from just 15% in 2021, reflecting both the rapid expansion of AI infrastructure and declines in other commercial segments.  

This boom has driven the growth of electrical equipment suppliers to between two and four times their long-term average, far outpacing the roughly 4% historical growth rate seen since 1982. With AI data centers requiring more power and more complex infrastructure, analysts expect this momentum to continue, keeping electricals at the forefront of the capital goods sector’s AI opportunity. 

Artificial intelligence remains the primary force shaping the semiconductor industry, extending the current upcycle even as broader end markets soften. In the latest Semiconductor Pulse: Q4 2025, AI-related spending continues to support valuations and capital investment, particularly across leading-edge logic and high-bandwidth memory. 

Hyperscalers are locked in an AI arms race, pushing capital expenditures higher into 2026 and providing rare visibility in an otherwise cyclical industry.

On the supply side, technology gaps and trade restrictions are limiting China’s ability to scale cutting-edge manufacturing. While China continues to expand mature-node capacity, it lacks the technological depth and cash flow to impact advanced foundry or DRAM supply materially. 

As a result, semiconductor investment outside China remains heavily skewed toward AI, with capital flowing to leading-edge logic, HBM, and targeted upgrades rather than broad-based capacity expansion.

Taiwan Semiconductor Manufacturing is the world’s leading outsourced semiconductor manufacturer, or foundry. Key customers include digital chip design behemoths such as Apple, AMD, Nvidia, and Qualcomm. We look at TSMC’s monthly revenue (both on a one-month basis and a three-month moving average) to gauge whether front-end manufacturing at the foundry may bode well for near-term revenue among the digital chip giants. 

TSMC has been benefiting from burgeoning demand for cutting-edge artificial intelligence chips, which has boosted its market share in the foundry market to just over 70% in 2025 year to date. It is immune to shifts between cloud AI and edge AI, and between bespoke and off-the-shelf chips, as all these groups rely on TSMC’s supply.

We believe TSMC’s average selling prices will increase as demand for its latest and future processes grows, and volume will benefit from bigger chips to ensure AI features on both servers and devices run smoothly.

By contrast, memory manufacturers appear far less compelling at current levels. Although AI demand has tightened supply for HBM and pushed DRAM prices higher, our analyst view memory stocks as grossly overvalued. 

On the demand front, AI continues to drive chip consumption, overshadowing weakness in other areas. Enterprise and cloud spending remain robust, but non-AI segments such as consumer electronics, automotive, and industrial chips face a bumpy near-term outlook. 

When it comes to the cybersecurity landscape, AI will be a new demand driver as attacks become more sophisticated. 

Although the AI security market is small right now, we expect rapid growth as the use of applications proliferates. And for good reason—our recent cybersecurity report suggests that the cost of a data breach is almost 50% higher for companies not using AI security compared with those that leverage these tools. 

Given that roughly 10% to 12% of public cloud spending is geared toward security solutions, we forecast the public cloud spending catalyzed by AI will add another $15 billion to $18 billion in security spending. 

Investing in AI can help advisors strengthen investment strategies and offer value. By knowing key considerations, you can choose AI stocks and meet investors’ evolving needs with confidence. Start your Morningstar Investor free trial today to unlock in-depth research, stock analysis, and portfolio insights.