EMO - ClearBridge All Cap Value Strategy Q1 2024 Portfolio Manager Commentary

2024-04-27 13:05:00 ET

Summary

• ClearBridge is a leading global asset manager committed to active management. Research-based stock selection guides our investment approach, with our strategies reflecting the highest-conviction ideas of our portfolio managers.
• The accelerating pace of power demands among artificial intelligence aspirants is underappreciated and will involve a rising pull on already stretched energy resources.
• The Strategy outperformed its benchmark for the first quarter, as strong results from our utilities and IT stocks overcame headwinds to our energy holdings.
• While there is a lot to be excited about with regards to AI, investors should temper some of their enthusiasm given the mounting risks to medium-term growth.

By Reed Cassady, CFA, Albert Grosman & Sam Peters, CFA

AI Solutions Require Solving Power Problems

Market Update

The market is focused on the transformative potential of artificial intelligence ('AI') but, in our view, has not come fully to grips with the real-world bottlenecks attached to this emerging technology. While markets appear to be increasing the supply of leading-edge graphics processing units to meet accelerating demand, new pinch points have emerged as the AI arms race gains pace. These include sourcing data center sites, lining up connections to the electrical grid, obtaining cooling equipment, and so forth. While we believe markets will eventually find a solution to most of these impediments, the lifeblood of this AI infrastructure is electricity, and access to the electrical grid and power generation capacity will likely prove to be more durable headwinds....

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