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Q1 RESULTS, AGENTIC AI AND REGULATORY TAILWINDS SUPPORT TECH OUTLOOK - FEDERATED HERMES

Tech and AI haven't been top of the agenda this year, as trade wars and real wars alike roiled markets and kept investors busy enough.

But over at Federated Hermes Sustainable Global Equity fund, investment director Jessica Henry says the team still believes in the sector despite its slow start to the year and remain structurally bullish on AI over the longer term.

"Concerns around the U.S.’ technological dominance over China, uncertainties surrounding data centre Capex growth possible overspending by tech companies, and the potential impact of trade restrictions all contributed to a rocky beginning to the year," said Henry.

But her first reason for optimism? Mega-cap tech's strong Q1 earnings.

"Microsoft’s results in particular propelled enthusiasm (particularly on Azure) as it meaningfully beat expectations with growth reaccelerating."

Her second is the potential of "agentic AI," a concept she says has been centre stage at recent tech conferences.

"Agentic AI differs from previous AI advancements in that it can independently assess challenges and determine the best course of action without human input," she said.

Specific use-cases span software engineering, customer support, and digital marketing or content generation.

Her third and final rationale is the expectation for a more benign regulatory backdrop in the space.

"The Trump administration recently rescinded the AI Diffusion Rule, which had imposed strict export controls on AI semiconductors," says Henry, a move that could serve as a tailwind for semis going forward and boost investor sentiment.

(Lucy Raitano)

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