Why Betting Against Nvidia in the AI Arms Race Could Be a Mistake

Dec 12, 2025

Dan Kemp, Chief Research and Investment Officer at Morningstar Investment Management Europe, and Brian Colello, Senior Equity Analyst focusing on semiconductors, delve into the key challenges facing investors. They discuss strategies to navigate market uncertainty, the massive spending on AI infrastructure, and the execution risks involved. Brian sheds light on NVIDIA’s performance and competition, specifically from China, while emphasizing the importance of long-term discipline. Their insights reveal a shifting investment landscape as we approach 2026.

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ADVICE

Prepare With A Framework Not Forecasts

Morningstar offers a framework, not a single forecast, to help investors prepare for multiple outcomes in 2026.
Focus on thinking through scenarios and building portfolios that work across outcomes instead of anchoring to one prediction.

ADVICE

Avoid Herding; Match Portfolio To Goals

Investors should practice independence and avoid herd behavior by looking for unloved parts of the market.
Build portfolios that match your objectives and risk tolerance rather than chasing top returns.

INSIGHT

AI Build-Out Is Massive

The AI build-out is one of the largest construction projects in history, rivaling railroads and the internet in scale.
Companies are building massive GPU clusters to train and run models, driving unprecedented global compute demand.

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A shift in mindset can help investors cope with market uncertainty.

2025 was a case study in the futility of trying to predict the market. Wall Street had lofty expectations for stocks entering the year. Then the tariff shock in April rattled the markets and many firms lowered their annual stock forecasts in response. They later raised them—after stock prices rebounded. With the new year on the horizon, Morningstar’s 2026 Global Outlook report is offering investors tactics to weather whatever the future may hold.

Morningstar strategists and an analyst will discuss key challenges facing investors in 2026 in our series. Dan Kemp, the chief research and investment officer with Morningstar Investment Management Europe, is one of the major driving forces behind the report.

We’re going to dig into research analyzing the AI arms race and its worldwide buildout. A team of Morningstar researchers have investigated the spending and the risks. Morningstar Research Services’ senior equity analyst Brian Colello was part of the effort. Brian also covers Nvidia. He discusses the AI king’s outlook, competition, and stock.

AI Arms Race: How Tech’s Capital Surge Will Reshape the Investment Landscape in 2026

On this episode:

00:00:00 Welcome

00:01:48 We typically talk about your Markets Brief column, but today we’re focusing on “Morningstar’s 2026 Global Investment Outlook.” The theme is “preparing for what comes next.” What will investors looking for ways to cope with uncertainty find in this in-depth report?

00:02:35 What makes Morningstar’s outlook different from other companies?

00:03:21You’ve written about how a few ideas from the global investment report resonated with you. What are they, and why?

00:05:01 As we wrap up our conversation, what’s a lesson from 2025 that you want investors to take into 2026?

00:07:13 Big Tech companies are spending hundreds of billions of dollars on the global construction boom. Where’sthe money going, and how does this spending compare to other sectors like energy?

00:08:20 This massive buildout comes with execution and cost risks. What’s at stake if hyperscalers underestimate these challenges?

00:09:54 How is AI affecting sector valuations? How does it compare to the tech bubble in the late 1990s?

00:12:18 Morningstar believes many investors are already heavily exposed to AI due to Big Tech’s size in broad stock indexes. How can folks counteract that?

00:14:31Let’s pivot to the AI industry leader, Nvidia. The chipmaker’s stock took a big hit when DeepSeek arrived in January. Nvidia became the world’s first $5 trillion company in October. What are your thoughts about the year Nvidia is having?

00:17:20 Rival chipmaker Moore Threads recently made its market debut in China. What would it mean for Nvidia if China comes out with more advanced chips?

00:20:12 Interest is growing in Alphabet’s AI chips. Can Nvidia fend off competition from one of its customers?

00:23:30 What is your outlook for Nvidia and other chipmaker stocks? And which do you think is undervalued?

00:26:18What’s the takeaway for investors regarding Nvidia and the AI arms race?

Watch more from Morningstar:
Here’s What Your Retirement Spending Rate Should Be in 2026

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