CompaniesFinancial ServicesNuveenPrint articleSep 7, 2026 – 1.53pmThe extraordinary growth of a handful of US technology companies has left global sharemarket benchmarks carrying a degree of concentration few investors would once have associated with a diversified international portfolio.Artificial intelligence has reinforced the dominance of the biggest technology stocks, driving investment into computing power and data centres while lifting expectations for companies already among the largest in the world. Yet beneath the headline indices, equity returns have broadened across countries, sectors and investment styles.AI is reshaping global equities as investors weigh concentration risk against opportunities beyond dominant technology companies. iStockFor Australian institutional investors, that creates an unusual problem. Superannuation funds are allocating more money offshore as their assets grow, while regulatory scrutiny has made them more conscious of performance against benchmarks. Those benchmarks can themselves contain large exposures to a small number of companies.Willis Tsai, head of global equities at Nuveen, describes it as a “concentration paradox”.“Levels of concentration within major market benchmarks, be it the S&P 500, be it the MSCI World, are at or very near historically high levels,” he says. “Now, I think the paradox is there’s still a very broad opportunity set.”AdvertisementTsai says strong returns have appeared across different regions, investment styles and market capitalisations over the past year, even as attention remains fixed on the biggest US technology companies.Willis Tsai, head of global equities at Nuveen. Benchmark-aware investors cannot ignore companies that have grown to dominate an index. Tsai says Nuveen assesses the prospects of the biggest companies individually, including their exposure to AI and the likely returns from the huge amounts being invested in it. Beyond them, however, lies a much larger group of companies whose fortunes are not tied primarily to continued growth in AI capital expenditure.“You have the rest of the entire world, companies across other sectors, across other regions that present unique, idiosyncratic opportunities that are not purely driven by whether AI capex goes up further or not,” he says.Recent index data bears out the scale of that concentration. MSCI found that as of April the top 10 companies accounted for 37.5 per cent of the MSCI USA Index, compared with 10.9 per cent of the MSCI EAFE Index, covering developed markets outside the US and Canada. The top 10 represented 23.6 per cent of MSCI ACWI.Opportunities outside the USNuveen’s research found 42 of the world’s 50 best-performing stocks in 2025 were domiciled outside the United States, despite the attention commanded by America’s mega-cap companies. The firm’s research points to opportunities ranging from European financials and industrial companies to Japanese corporate reform and AI-related businesses across Asia.Tsai says the intense scrutiny of the biggest companies can make it harder for active investors to find something the market has overlooked.“When you’re thinking about large liquid companies that have the opportunity to drive outsized returns, and thus alpha for the active manager, you’re going to have to look further afield,” he says.An opportunity can arise when a company’s earnings grow faster than expected or investors come to place a higher value on those earnings. In markets and sectors receiving less analyst attention, forecasts and valuations can leave more room for disagreement.“If you go further afield and look at other countries or sectors, you do have the opportunity where there’s less efficiency in terms of earnings forecasts,” Tsai says.Japan provides one example. Long regarded by many international investors as a cyclical market, corporate governance reforms have strengthened the case for viewing some Japanese companies as long-term holdings.Share buybacks are estimated to have risen from about ¥9 trillion in 2023 to ¥22.5 trillion in 2026. Companies are unwinding cross-shareholdings, disposing of non-core operations and paying greater attention to measures such as return on equity.Tsai says Japan has long contained high-quality businesses, but inefficient capital allocation and weaker shareholder engagement historically contributed to discounted valuations.“In recent years we are seeing a real and meaningful shift in terms of improving shareholder returns,” he says.Japan also sits across several investment themes, including changes in Asian manufacturing supply chains and the expansion of AI-related technology. Tsai says that combination has attracted investors who previously held the country at benchmark weight or below.AI moves beyond technologyThe AI investment boom is also extending beyond semiconductor manufacturers and the technology giants building large computing platforms.Data centres require power, networks and physical infrastructure, directing attention towards utilities, listed real assets and other businesses supporting the build-out.“A data centre is much more than chips,” Tsai says. “It’s infrastructure, power, listed real assets, all the adjacent infrastructure around that.”Many of those assets have long development periods, durable physical characteristics and established income streams. But Tsai says the bigger investment question will emerge as companies outside technology begin putting the computing capacity now being built to work.The billions being spent by hyperscalers and AI laboratories ultimately depend on businesses becoming substantial consumers of artificial intelligence. Tsai says that would spread the effects well beyond technology as companies combine AI with their own data and business processes.“Then it’s not tech at all,” he says.The effects will take time to become visible in company accounts. Tsai says that over an 18 to 24-month investment horizon, investors may begin to see companies distinguish themselves through revenue growth and profitability as a result of adopting AI.Predicting exactly where the economy, politics or technology will move over that period is another matter. Tsai says the investment approach is to favour “preparedness over prediction”, examining management decisions, industry structures, competitive positions and where profits are accruing.“Trying to predict high-level outcomes that are subject to individuals’ decisions is very, very difficult,” he says.Australian funds reassess active managementFor Australian superannuation funds, the concentration debate comes as both the size and construction of their global equity portfolios are changing.Andrew Kleinig head of Australasia and Southeast Asia at Nuveen, says the growth of the superannuation system is pushing more capital overseas, while regulation has put greater emphasis on performance relative to benchmarks.Australian institutions have traditionally carried a strong domestic equity bias, he says, but the size of the local sharemarket means more of the money flowing into the superannuation system is being invested offshore.Andrew Kleinig, head of Australasia and Southeast Asia at Nuveen. The way that money is managed is also changing. Kleinig says institutional equity portfolios have moved through several phases, from a heavy reliance on active management to greater use of low-cost passive strategies and then quantitative approaches.Over the past 18 months, he says some institutions have begun rebuilding their allocations to fundamental active managers alongside those strategies.“A lot of institutions we’ve found in the last 18 months are coming back to that third leg of their equities portfolio being a fundamental active approach,” he says.Regulation is helping shape what that active exposure looks like.Kleinig says Australian funds were previously more willing to allocate money to concentrated equity managers whose portfolios could depart substantially from their benchmarks. Greater attention to benchmark-relative performance at both whole-of-fund and individual asset-class level has changed the equation.Kleinig says passive, systematic and active approaches can complement one another, while fundamental managers can also provide institutions with detailed company and sector research alongside portfolio management.For Australian investors, one form of concentration comes from their historic exposure to the domestic sharemarket. Moving offshore can reduce that risk, only to expose a portfolio to another form of concentration in global benchmarks dominated by technology companies.Tsai says the sheer size of some companies has changed the mathematics of benchmarks that were designed to provide broad market exposure. He says that in some markets the top five or seven companies can represent 50 to 60 per cent of benchmark weight.“How do we provide ultimately the end investor with diversified exposure, knowing that there’s embedded concentration within these benchmarks?” he says.For Australian funds putting more capital to work overseas, the question is therefore moving beyond whether to invest globally. It is how much of a global allocation should follow the weight of the benchmark, and where investors should search for returns that are not dependent on the same handful of companies.To find out more, visit Nuveen.com/GlobalEquities.Important information This material, along with any views and opinions expressed within, are presented for informational and educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as changing market, economic, political, or other conditions, legal and regulatory developments, additional risks and uncertainties and may not come to pass. This material is not intended to be a recommendation or investment advice, does not constitute a solicitation to buy, sell or hold a security or investment strategy and is not provided in a fiduciary capacity. The information provided does not take into account the specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on an investor’s objectives and circumstances and in consultation with their financial advisors. Past performance is no guarantee of future results. All investments carry a certain degree of risk, including the possible loss of principal, and there is no assurance that an investment will provide positive performance over any period of time. 5821954Sponsored by NuveenThis content has been funded by an advertiser and written by the Nine commercial editorial team.SaveLog in or Subscribe to save articleShareCopy linkCopiedEmailLinkedInTwitterFacebookCopy linkCopiedShare via...Gift this articleSubscribe to gift this articleGift 5 articles to anyone you choose each month when you subscribe.Subscribe nowAlready a subscriber? LoginLicense articleRead MoreNuveenFetching latest articles