Investing in the “Early Innings” of the AI Value Chain

As the investment landscape continues to be reshaped by artificial intelligence, Pictet Asset Management held a product due diligence session, to provide advisors with a roadmap for navigating the evolving AI value chain. Moderated by Kirsten Chang, a senior industry analyst at VettaFi, the discussion explored the Pictet AI & Automation ETF (PBOT) while characterizing the AI landscape as a multi-layered opportunity still in its “early innings.”

A Legacy of Thematic Expertise

While Pictet is a relatively new entrant to the U.S. ETF market, Seiji Nishimura, head of US Intermediaries, reminded attendees of the firm’s deep roots. Headquartered in Switzerland and managing over $330 billion in assets, Pictet has been a pioneer in thematic investing since the mid-1990s.  “We’ve been doing thematic equities for over three decades,” Nishimura noted. This was in reference to the firm’s track record which includes early entries into water, clean energy, and robotics. Its private ownership structure allows for a long-term focus on structural trends rather than quarterly market noise.

The 4 Phases of AI Innovation

The session’s core framework came from Anjali Bastianpillai, senior client portfolio manager, in the Thematic Equities team at Pictet. Bastianpillai described an “S-curve” approach to identifying opportunities across four phases of AI development.

The first phase — core infrastructure — centers on the computing backbone of AI, including advanced GPUs, CPU accelerators, and significant capital spending by hyperscalers such as Meta and Microsoft.

The second phase, “AI on the edge,” reflects the shift toward running models closer to end users, including on smartphones and personal computers.

The third phase focuses on applications, marking a transition from generative AI to so-called agentic AI, where software agents can execute code and manage digital identities.

The fourth phase extends into physical AI and automation, encompassing areas such as robotaxis, humanoid systems, and robotic surgery.

See more: Pictet Grows U.S. Lineup With 2 Active EM ETFs

Moving Beyond the “Mag 7”

A recurring theme throughout the discussion was concentration risk in traditional benchmarks. Against that backdrop, PBOT is positioned as a more concentrated portfolio, typically holding between 40 and 60 stocks. The strategy relies on fundamental research, including 600 to 700 meetings each year to vet leadership and innovation. It is specifically designed to adjust holdings as the competitive landscape evolves.

“You want that agility to pick the right stocks at the right time and remove those that don’t really compete anymore,” Bastianpillai explained.

Strategic Allocation for Advisors

For U.S. advisors already heavily exposed to core growth or “Magnificent 7” names, Nishimura suggested three ways to utilize PBOT including:

• Satellite Allocation: To access AI as a long-term growth theme for greater alpha potential.
• Core Complement: To provide a more diversified opportunity set than concentrated large-cap tech exposure.
• Smarter Exposure: Using active management to stay ahead of a rapidly changing trend rather than relying on “autopilot” passive strategies.

Addressing Macro Risks

In response to concerns about geopolitical tensions and labor shortages, Pictet sees these pressures as long-term tailwinds for the theme. Trends like reshoring and nearshoring are fueling major investment in semiconductor fabs and industrial robotics. Especially as countries push for greater supply chain independence. And while the AI race heats up among players like OpenAI, Anthropic, and xAI, Pictet is focused less on the front-runners and more on the underlying tech stack — especially the software companies enabling security and governance.

For more news, information, and analysis, visit VettaFi | ETF Trends.

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