MW Why the most important company to enable AI isn't Nvidia, according to this fund manager

By Barbara Kollmeyer

Janus Henderson manager on an AI giant, software picks and one out-of-favor stock

An image of an electronic wafer shown at Taiwan Semiconductor Manufacturing Company (TSMC) Museum of Innovation in Hsinchu in Nov. 2024. It's the most important company for AI right now, says Janus Henderson fund manager Jonathan Cofsky.

The S&P 500 logged its 23rd record close on Monday. That's 20 more record closes than this time last year, an impressive performance that may also keep bubble talk alive.

With stock markets continually hitting new records, one fear is a repeat of the dot-com boom and bust. However, Jonathan Cofsky, co-portfolio manager for Janus Henderson's $9.35 billion Global Tech and Innovation Fund JNGTX, sees a big difference that should keep a growth peak at bay: physical and power constraints.

Cofsky, who has 20 years of industry experience, does worry whether capital will be allocated seamlessly and efficiently. "We don't see the signs of the AI build-out ending over the next couple of years. But the history is if you spend this much money over a five- to 10-year period, there is going to be ebbs and flows."

His fund, which is beating the S&P 500 on a three- and 10-year annualized basis, is focused on finding "the key enablers" of the AI ecosystem, such as Taiwan Semiconductor Manufacturing, Nvidia (NVDA) and Broadcom $(AVGO)$.

TSMC (TW:2330) $(TSM)$ is the portfolio's top holding, edging just past Nvidia. "This is probably the most important company for enabling AI right now," he said.

It's the only foundry manufacturing chips exclusively for other companies and it is making vital leading-edge chips. When it comes to computing power, it doesn't matter what form is used, "TSMC makes all of it," he said.

For investors, putting money in the Taiwanese company is about answering a simple question: "How much compute is going to be built? And it doesn't matter which of the semiconductor vendors makes it because they're all making it at TSMC," he said.

Cofsky said one company the fund boosted its holding in earlier this year is chip designer Arm Holdings $(ARM)$, "with the view that agentic workflows and agents are going to be much more CPU intensive than prior iterations of AI. And ARM has the most pervasive architecture," he said.

While graphic processing units are the armies of workers trying to figure out how to do tasks, the central processing units are the managers organizing the workflow. AI agents involve a "combination of scheduling," a positive for ARM.

It's also "moving from just licensing IP to making their own chips with Meta as the first customer," he said. "And so as we get to the end of the decade, how successful will they be in working as a maker of chips versus a license, a license or an IP?"

Jonathan Cofsky, portfolio manager on Janus Henderson Investors' Global Technology and Innovation Team.

Cofsky also touched on the recent revival in software stocks, saying the sector is at risk of disruption because it automates labor, similar to AI. Looking at a history of disruptive secular trends, the manager said they found that when retail moved from physical to Amazon and online, it took four to six years for the market to figure out the winners and the losers.

The fund's research also found that only 10% to 20% of prior incumbents in those secularly disruptive periods made the transition.

Cofsky said they are focused on companies that are "really hard to recreate and where you could layer in AI and it could be additive to revenue," such as Datadog (DDOG) and Snowflake (SNOW), along with theoretical and design software groups with unique data, such as Cadence $(CDNS)$ or Guidewire $(GWRE)$.

"Snowflake and Datadog have seen a reacceleration of revenue from AI. And so we have to see if that sustains, but that's the best sign you could hope for," he said.

Cofsky has one more stock to flag: DoorDash $(DASH)$, which is slightly out of favor with investors right now. He said current concerns are centered on an investment cycle the delivery service is going through, and its exposure to macroeconomic trends and customers.

He said they're a founder-led company and they're expanding into new businesses like international grocery, and they could benefit from both generative and physical AI.

The markets

U.S. stock futures (ES00) (YM00) (NQ00) are pointing to a softer day for stocks, with oil prices (CL.1) (BRN00) also lower. Ten-year Treasury yields BX:TMUBMUSD10Y are easing, and gold (GC00) and silver (SI00) are rising.

The buzz

Marvell shares $(MRVL)$ are surging after Nvidia CEO Jensen Huang said the chip group could become the next trillion-dollar company.

Alphabet shares $(GOOGL)$ are dropping after announcing an $80 billion equity offering to pay for its AI expansion, including a deal to sell $10 billion worth of stock to Berkshire Hathaway $(BRK.A)$ $(BRK.B)$ at a slight discount.

Hewlett Packard Enterprise shares $(HPE)$ are headed for a record day after forecast-beating results and an increased revenue outlook.

Dollar General $(DG)$ earnings are ahead.

Cleveland Fed Pres. Beth Hammack will speak at 8:55 a.m., and the job- openings report is due at 10 a.m.

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The chart

"As of May 16th, the bigger tax refunds Americans have received this year no longer cover the higher costs of gasoline, diesel, and jet fuel caused by the war," Moody's Analytics' chief economist Mark Zandi writes in an X post providing this chart (h/t @dailychartbook). The Iran war is costing American households $100 billion, or nearly $750 per household, a big economic blow, but cushioned thus far by deficit-financed tax cuts, he said. Middle and lower-income households are facing the most pressure, and until the war ends, "they will have little choice but to rein in their spending, weighing further on the sagging economy."

Top tickers

These were the top-searched tickers on MarketWatch as of 6 a.m.:

 
Ticker  Security name 
NVDA    Nvidia 
MU      Micron 
TSLA    Tesla 
TSM     Taiwan Semiconductor Manufacturing 
MSFT    Microsoft 
SPCE    Virgin Galactic 
AMD     Advanced Micro Devices 
MRVL    Marvell 
AVGO    Broadcom 
PLTR    Palantir 

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Beyond the headlines

MarketWatch Picks: We're in our 50s with $5.3M invested. We'll have two kids in college and hope to retire at 60 with $350K to spend. Is it doable?

-Barbara Kollmeyer

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June 02, 2026 07:01 ET (11:01 GMT)

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