Investors still want AI exposure, just not all the risk
Advances in AI and strong earnings from the “Magnificent Seven” tech firms are driving the Nasdaq to new highs. But with concerns about high valuations, investors are looking for ways to participate in the sector while protecting their downside.
The Nasdaq 100 continues to break records. Having climbed from around 25,000 at the start of 2026 to above 29,000 in May, the technology-heavy index has been one of the standout performers in global markets.
Over the past five years, it has delivered returns of more than 120%, fuelled largely by a handful of dominant technology companies and the rapid rise of artificial intelligence (AI).
Yet as investors celebrate the gains, many are beginning to ask a more nuanced question: can the rally continue, and if so, how should they position themselves for what comes next?
The companies powering the market
Much of the Nasdaq's recent performance can be traced back to the so-called "Magnificent Seven" technology giants: Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta and Tesla.
The tech rally could enjoy further support, following the IPO of SpaceX and with IPOs by Anthropic and OpenAI in the pipeline. These companies sit at the centre of the AI revolution. From cloud computing and data centres to chips and software platforms, they are providing much of the infrastructure underpinning the next wave of technological innovation.
Importantly, their growth is not based solely on future expectations. Unlike previous periods of technology-driven market exuberance, today's market leaders are generating substantial revenues, profits and free cash flow. That financial strength has enabled them to invest aggressively in AI development and infrastructure, creating a virtuous cycle in which strong earnings help fund further innovation and growth.
For many investors, this is one reason the current technology rally appears fundamentally different from the speculative excesses of the dotcom era.
Why the AI story may still have room to run
Despite the significant gains already achieved, many market participants believe the AI investment cycle remains in its early stages.
Businesses across industries are only beginning to adopt AI at scale. At the same time, demand for computing power, cloud services and advanced semiconductors continues to grow rapidly.
The major technology firms have responded by committing hundreds of billions of dollars to expanding data centre capacity and AI infrastructure. Those investments are expected to support future earnings growth while reinforcing their competitive advantages.
Recent earnings seasons have largely supported this view, with many of the largest technology companies continuing to exceed analyst expectations despite an uncertain global economic backdrop.
The challenge facing investors
Of course, no investment theme moves in a straight line. The remarkable performance of technology stocks has pushed valuations higher and increased the concentration of global equity indices. Investors who have benefited from the rally may be wondering how much future growth is already reflected in share prices.
Others may be hesitant to commit new capital after such a strong run, concerned about the potential impact of slower economic growth, regulatory intervention or shifts in market sentiment.
The challenge is not necessarily whether to invest in technology, but rather how to participate in the opportunity while managing risk.
Different ways to gain exposure
Investors seeking exposure to the AI theme have a range of options available to them.
Some choose direct investments in individual technology companies. Others prefer exchange-traded funds (ETFs) that provide diversified exposure to broader technology indices such as the Nasdaq 100.
A growing number of investors are also exploring structured investment solutions that offer exposure to market growth while incorporating predefined risk-management features.
These structures can appeal to investors who remain constructive on the long-term outlook for technology but would like some protection against adverse market outcomes.
One recent example is a Nasdaq-linked structured investment launched by Investec.
“The solution provides exposure to the performance of the Nasdaq 100 over a fixed term, while incorporating downside protection features if held to maturity and subject to specified conditions,” says Brian McMillan from the Investec Structured Products team.
For investors, the appeal of such approaches lies in the ability to participate in powerful long-term investment themes while introducing greater certainty around potential outcomes.
“Should the outlook change, the capital protection feature in the structured product addresses concerns investors may have about the length and durability of AI-driven growth in the tech sector.”
Looking beyond the headlines
The AI revolution continues to reshape industries, business models and investment markets around the world. While debate will continue about valuations and the sustainability of recent gains, few would dispute the significance of the technological shift currently under way.
For investors, the question is increasingly less about whether AI will influence future economic growth, and more about how best to access that opportunity in a way that aligns with their investment objectives and risk appetite.
As the technology cycle evolves, balancing growth potential with prudent risk management may prove just as important as identifying the next breakthrough.
Looking for ways to gain exposure to global technology growth while managing downside risk? Learn more about the Investec ZAR Nasdaq 100 Geared Growth Flexible Investment Note.