BlackRock Discusses AI Trade: Momentum vs. Fundamentals

Helen Jewell, International CIO of Fundamental Equities at BlackRock, shared insights on investing in the artificial intelligence (AI) sector during J.P. Morgan's "Making Sense" podcast series. The discussion focused on the importance of a long-term investment strategy centered on company earnings potential, contrasting it with short-term market fluctuations.

Jewell emphasized that long-term investing requires focusing on a company's sustained ability to generate earnings and looking beyond daily market noise. She noted that while short-term gains can be attractive, true value creation stems from a company's competitive advantages and its capacity for sustainable earnings growth.

The fundamental equities strategy at BlackRock involves bottom-up stock selection with a long-term horizon. Jewell explained that investors should identify which AI-related companies—such as semiconductor, technology, or memory chip manufacturers—can truly deliver long-term growth. This approach distinguishes from investments made purely on the basis of short-term return expectations.

Jewell highlighted the benefits of long-term investing through the power of compounding. While valuation plays a more significant role in the initial years of an investment, earnings growth becomes the primary driver over extended periods. She also stressed the importance of growth quality, stating that companies should grow while maintaining high returns on capital, thereby fostering a virtuous cycle of renewal and success.