The Trillion Dollar Question – Are We In an Artificial Intelligence Bubble?

November 17, 2025

By: Varun Choyah                                                                                                       View PDF
Funds in focus: Brompton Tech Leaders Income ETF (TLF), Brompton Global Dividend Growth ETF (BDIV)

Artificial Intelligence (AI) has emerged as the defining technological catalyst of this investment cycle. Since the launch of ChatGPT in November 2022, capital expenditure (“CapEx”) for the top hyperscalers has risen 2.5x. Within the next three-year period (2025-2027) hypsercalers will have spent an estimated total of $1.4 trillion according to Bloomberg. AI-driven CapEx is expanding faster than any prior technology cycle, reflecting both a race for compute dominance and the structural retooling of global infrastructure. The deeper question remains: how much of AI’s trillion-dollar promise is already priced in, and are we in a bubble?

Capital Expenditure for Major Hyperscalers ($ billions)

Source: Bloomberg (data retrieved Oct 31 2025)

The euphoria around AI investments draws parallels with the prior dot com bubble where overinvestment in infrastructure was dominant and market concentration risk was high. Unlike the dot com era, relative valuations are less exuberant, hyperscalers’ CapEx is mainly funded by cash flows and there are tangible outcomes from machine learning versus external financing and empty promises. However, the current AI spending spree has led investors to question the long-term return on investment (ROI). The answer to this depends on whether we can avoid the trough of disillusionment like in prior technological cycles and on how much value creation is ultimately realized. Historically, the value creation from each subsequent technological revolution was several orders of magnitude greater than the previous (mainframe-desktop-internet-mobile-cloud).

We are in the first innings of broader AI adoption, and the early winners are semiconductor and computing hardware companies that build the underlying infrastructure. Advanced AI datacenters require up to 2x – 3x more capital expenditure per megawatt (MW) than traditional cloud data centers primarily due to the specialized, high-density hardware and the extensive, customized infrastructure needed to power and cool that hardware.1 AI’s power demand could reach up to 9% of U.S. electricity consumption by 2030 which is double the current levels according to the Electric Power Research Institute. Given the overwhelming demand, infrastructure bottlenecks create pricing power for semiconductor players and power constraints are creating a second derivative trade in utilities and data center REITs.

In our view, the next phase in the AI revolution will likely result in commoditization of the infrastructure layer as the market matures and supply bottlenecks are alleviated. Software and application companies will emerge as beneficiaries as value creation diffuses upwards. While the near-term narrative is dominated by semiconductor and cloud infrastructure, the next phase will hinge on productivity gains and innovation diffusing through non-tech sectors. The trillion-dollar question is less about whether AI will transform economies—we believe it will—and more about who captures the resulting economic rents.

We believe active investing is important given lofty expectations in the market. Investors must navigate between concentration risk at the top and be disciplined in capital rotation to second-order beneficiaries and emerging diffusion opportunities downstream. We believe a barbell approach balancing AI enablers and selective beneficiaries would provide asymmetric exposure to AI.

Brompton’s Approach

Brompton takes an active approach to investing in technology companies, particularly in our technology fund, Brompton Tech Leaders Income ETF (TLF, TLF.U) and in the technology holdings in Brompton Global Dividend Growth ETF (BDIV). We prefer to invest in companies that have market leading positions, a combination of revenue growth and free cash flow generation and expanding pipeline of opportunities. In TLF we actively manage our weights to software, semiconductor, IT services and hardware stocks. In addition, we use an active call writing overlay in order to earn option premiums and lower the overall volatility of returns associated with owning a portfolio of equity securities. This has enabled TLF to be awarded the LSEG Lipper Fund Award for Best Sector Equity Fund over 10 years.2

1Source: J.P. Morgan. October 16, 2024.

2LSEG Lipper Fund Awards, © 2025 LSEG. All rights reserved. Used under license. LSEG Lipper Fund Awards Canada 2025 Winner, Brompton Tech Leaders Income ETF, Best Sector Equity Fund over ten years, out of a total of 17 funds. The corresponding Lipper Leader ratings of TLF for the period ending July 31, 2025 are as follows: 3 (3 years), 5 (5 years), 4 (10 years). The LSEG Lipper Fund Awards, granted annually, highlight funds and fund companies that have excelled in delivering consistently strong risk-adjusted performance relative to their peers. The LSEG Lipper Fund Awards are based on the Lipper Leader for Consistent Return rating, which is an objective, quantitative, risk-adjusted performance measure calculated over 36, 60 and 120 months. The fund with the highest Lipper Leader for Consistent Return (Effective Return) value in each eligible classification wins the LSEG Lipper Fund Award. For more information, see lipperfundawards.com. Although LSEG Lipper makes reasonable efforts to ensure the accuracy and reliability of the data used to calculate the awards, their accuracy is not guaranteed.

3Returns are for the periods ended October 31, 2025 and are unaudited. TLF inception date May 20, 2011. TLF.U inception date August 8, 2019. The table shows the ETF’s compound return for each period indicated. Past performance does not necessarily indicate how the ETF will perform in the future. The information shown is based on net asset value per unit and assumes that distributions made by the ETF during the periods shown were reinvested at net asset value per unit in additional units of the ETF. Past performance does not necessarily indicate how the ETF will perform in the future.

This report is for information purposes only and does not constitute an offer to sell or a solicitation to buy the securities referred to herein. The opinions contained in this report are solely those of Brompton Funds Limited (“BFL”) and are subject to change without notice. BFL makes every effort to ensure that the information has been derived from sources believed to be reliable and accurate. However, BFL assumes no responsibility for any losses or damages, whether direct or indirect which arise from the use of this information. BFL is under no obligation to update the information contained herein. The information should not be regarded as a substitute for the exercise of your own judgment. Please read the applicable prospectus before investing.

Commissions, trailing commissions, management fees and expenses all may be associated with exchange-traded fund investments. The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. Please read the prospectus before investing. Exchange-traded funds are not guaranteed, their values change frequently and past performance may not be repeated.

Information contained in this document was published at a specific point in time. Upon publication, it is believed to be accurate and reliable, however, we cannot guarantee that it is complete or current at all times. Certain statements contained in this document constitute forward-looking information within the meaning of Canadian securities laws. Forward-looking information may relate to matters disclosed in this document and to other matters identified in public filings relating to the ETFs, to the future outlook of the ETFs and anticipated events or results and may include statements regarding the future financial performance of the ETFs. In some cases, forward-looking information can be identified by terms such as “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”, “intend”, “estimate”, “predict”, “potential”, “continue” or other similar expressions concerning matters that are not historical facts. Actual results may vary from such forward-looking information. Investors should not place undue reliance on forward-looking statements. These forward-looking statements are made as of the date hereof and we assume no obligation to update or revise them to reflect new events or circumstances.

Varun Choyah

Assistant Vice President & Associate Portfolio Manager

Mr. Choyah specializes in equity security selection with a focus on the global technology and healthcare sectors. Previously, he was a research associate covering technology equities at various Canadian investment dealers for nearly a decade.

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