Technology is no longer simply a sector within a diversified portfolio. For most investors holding a global equity index fund, it has become the dominant factor — one that dwarfs all others in its influence on returns, volatility, and concentration risk. As of mid-2026, the seven largest technology and technology-adjacent companies in the United States — collectively labelled the "Magnificent 7" (Apple, Microsoft, NVIDIA, Alphabet, Meta, Amazon, and Tesla) — account for more than 30% of the S&P 500 by market capitalisation. A UK investor holding a global tracker fund is, in effect, making a very large bet on a handful of US technology companies whether they know it or not.
Artificial intelligence is the force that has driven this concentration to its current extreme. Capital expenditure on AI infrastructure — data centres, power, cooling, chips — is running at hundreds of billions of dollars per year globally. The equity market has rewarded the companies at the centre of this buildout with extraordinary valuations. Whether those valuations are justified by long-run earnings potential, or whether they reflect a speculative premium that will eventually deflate, is among the most important questions in investment markets today.
This guide sets out the key themes, risks, valuation frameworks, and access routes for internationally mobile HNW investors navigating the technology and AI investment landscape.
Magnificent 7 Concentration Risk
The mathematics of index concentration are straightforward but their implications are easy to underestimate. When more than 30% of the S&P 500 is in seven companies, a move in those companies dominates the performance of the index. During the AI-driven rally of 2023–2025, this concentration amplified returns for global tracker investors. In a correction — which could be triggered by any one of several plausible catalysts — the same concentration would amplify losses.
The MSCI ACWI (All Country World Index), which most global tracker funds replicate, shows a similar pattern: the US represents approximately 65% of the index, and within that, technology and technology-adjacent companies account for a disproportionate share. A "globally diversified" index fund is, in reality, a heavily US technology-weighted product.
For investors who recognise this and want to manage it, there are two broad options: explicitly reduce technology weight by tilting towards equal-weight indices, factor indices, or sector-specific allocations that exclude technology; or embrace the concentration while being clear-eyed about the associated risk.
AI Infrastructure: The Picks-and-Shovels Opportunity
The most reliable long-run investment lens for transformative technology waves is often the infrastructure layer — the "picks and shovels" that enable the broader buildout, rather than the application companies whose success depends on winning uncertain market competition.
In the current AI buildout, the infrastructure layer includes:
Semiconductor manufacturing: NVIDIA's dominance of AI training chips (H100, H200, Blackwell series) is well documented. Its data-centre revenue has grown from under $4 billion per quarter in 2022 to in excess of $35 billion per quarter through 2025 (around $62 billion in its quarter ending January 2026). The question is how long this dominance persists as AMD, Intel, and custom chips from Apple, Google, and Amazon attempt to compete.
Semiconductor equipment: ASML (Netherlands) is the sole manufacturer of EUV (extreme ultraviolet) lithography machines, which are essential for producing the most advanced chips. Without ASML machines, TSMC and Samsung cannot make cutting-edge logic chips. This near-monopoly position provides a uniquely durable competitive moat, and ASML's order book provides multi-year revenue visibility.
TSMC (Taiwan Semiconductor Manufacturing Company) manufactures chips designed by fabless companies including NVIDIA, Apple, AMD, and others. Its fabrication technology leadership (3nm and now 2nm process nodes) makes it indispensable. TSMC's geopolitical exposure — its fabs are predominantly in Taiwan — is the primary risk factor.
Data centre infrastructure: power, cooling, and networking equipment are all capacity-constrained. Companies serving this market — Vertiv (power and cooling), Schneider Electric, Eaton — have benefited from AI-driven demand and have more modest valuations than the chip companies.
The Software Layer: Harder to Value
The application layer of AI — the software companies building products on top of large language models and other AI systems — is where the investment case becomes most contested. Revenue models are still evolving. Competitive dynamics are unclear: will AI software markets be winner-take-all, or will multiple players coexist? Will large platform companies (Microsoft, Google, Meta) capture most of the economic value, or will specialist AI software companies carve out durable positions?
These questions are genuine, and the uncertainty justifies caution around valuations. Many AI software companies trade on very high revenue multiples that embed assumptions about market size, margin trajectory, and competitive outcomes that may not materialise.
Valuation Metrics for Technology
Standard earnings-per-share metrics are less useful for technology companies at different stages of growth and investment cycle. More appropriate frameworks include:
EV/EBITDA (Enterprise Value to Earnings Before Interest, Tax, Depreciation and Amortisation) provides a measure of operational earnings power before capital structure and accounting differences. For large-cap technology companies, EV/EBITDA multiples of 20–30x reflect elevated but not unprecedented growth expectations.
Rule of 40 is commonly applied to software companies: revenue growth rate plus operating profit margin should exceed 40%. It balances growth against profitability and helps identify companies that are growing at the expense of unsustainable cash burn.
Free cash flow yield is increasingly favoured by more conservative technology investors: companies generating substantial free cash flow (Apple, Microsoft, Alphabet, Meta) are less vulnerable to a valuation reset than companies where value is purely based on future growth assumptions.
ETF Options for UK Investors
Invesco QQQ Trust provides exposure to the NASDAQ-100, a technology-heavy index of 100 large-cap US non-financial companies. It is available as a UCITS equivalent on European markets. This provides concentrated US technology exposure.
L&G Artificial Intelligence UCITS ETF (ticker: AIAI on LSE) tracks the ROBO Global Artificial Intelligence Index, which focuses specifically on companies across the AI value chain including pure-play AI, cloud, and data companies. TER approximately 0.49%.
iShares S&P 500 Information Technology Sector UCITS ETF provides exposure to the IT sector of the S&P 500 specifically, for investors who want to express a technology view while keeping the rest of their portfolio in broader market funds.
For investors concerned about Magnificent 7 concentration in their existing global trackers, equal-weight or factor-tilted alternatives may be worth exploring.
UK Technology Sector: Smaller, Different
The UK technology sector exists and is growing but is a fraction of the US in terms of market capitalisation and global relevance. FTSE-listed technology companies include Sage and a range of mid-cap names in fintech, software, and technology services (Aveva, once a FTSE 100 constituent, was taken private by Schneider Electric in 2023–24 and is no longer listed). For UK-domiciled investors, there are domestic tax wrapper options (ISAs, SIPPs) that make UK-listed technology holdings tax-efficient — but the scale and dynamism of the opportunity is materially smaller than in the US.
Risk Summary
The principal risk for technology sector investors in 2026 is valuation. The sector has already discounted a great deal of the AI growth story. If earnings growth disappoints — due to AI monetisation taking longer than expected, competition compressing margins, energy or regulatory constraints on AI buildout, or simply a cyclical slowdown in cloud and enterprise spending — valuations can reset sharply.
Regulatory risk is growing: antitrust actions against Microsoft, Google, Apple, and Meta are progressing in multiple jurisdictions. The EU AI Act is imposing compliance requirements on AI systems. These risks are real but their financial impact is difficult to quantify.
Geopolitical risk around semiconductors — specifically the Taiwan question for TSMC and US export controls on advanced chips — represents a tail risk that is not priced into most scenarios.
Values can fall as well as rise. This article is for information purposes and does not constitute investment advice.
How Global Investments Can Help
Our advisory team works with internationally mobile HNW clients on portfolio construction across all major sectors, including technology. We help clients navigate concentration risk in global indices, identify appropriate allocation levels for technology exposure given their overall portfolio composition, and select vehicles suited to their residency, tax position, and risk tolerance.
Contact our team to discuss your portfolio strategy.
This article is for general information only and does not constitute financial, legal or tax advice. Rules, prices and regulations change; verify current requirements with a qualified adviser before acting.