What is a foundational AI model and why does it matter for investors?

A foundational AI model is a large, powerful artificial intelligence system trained on enormous amounts of data that can be used as a base for many different applications — think of it like the engine inside many AI-powered products. Building one requires huge amounts of computing power, specialised chips, and expert talent. For investors, this matters because the companies that have already built strong foundational models, like Google and Microsoft, have a significant head start that is very costly and time-consuming for competitors to close.

Why did Meta's delay of its Avocado AI model cause investors to take notice?

Meta postponed the launch of its Avocado AI model after it failed to meet internal performance benchmarks. This was notable because Meta had committed an extraordinary $135 billion to its AI efforts. The delay highlighted that even with vast financial resources, catching up with established AI leaders is genuinely difficult. For investors, this reinforced the idea that companies like Google and Microsoft, which already have mature AI models and infrastructure, could continue to hold a competitive advantage for longer than previously expected.

What is AI infrastructure and why are those companies included in this group?

AI infrastructure refers to all the physical and technical components needed to build and run AI systems. This includes chips (like GPUs), the machines used to manufacture those chips, high-speed networking equipment, data centres, and the memory and storage systems that handle huge datasets. Without these, no AI model can be trained or deployed. Companies providing this infrastructure benefit from the entire industry's growth, regardless of which software company comes out on top, which is why they are a key part of this group.

What does 'capital expenditure' mean and why is it relevant here?

Capital expenditure, often called 'capex', refers to the money a company spends on physical assets like buildings, machines, or technology infrastructure. In the context of AI, companies are spending enormous sums on servers, chips, and data centres to build and operate their AI systems. For investors, high and sustained capital expenditure by AI companies means reliable, long-term revenue for the hardware and infrastructure suppliers in this group.

What is a GPU and why is it so important for artificial intelligence?

A GPU, or Graphics Processing Unit, was originally designed to render graphics in video games. However, it turned out to be exceptionally good at the type of mathematical calculations needed to train AI models — far better than traditional processors. As a result, GPUs have become the essential hardware behind almost all large-scale AI development, which is why companies like Nvidia, which designs them, and TSMC, which manufactures them, are so central to the AI industry.

What does 'analyst rating' mean on a stock card?

An analyst rating is a recommendation made by a professional financial analyst about whether a stock is worth buying, holding, or selling. Ratings typically range from 'Strong Buy' at the positive end to 'Sell' at the negative end. They are based on the analyst's research into the company's financials, competitive position, and growth prospects. On Nemo, the analyst rating shown on each stock card is an aggregated view drawn from multiple professional sources, giving you a broad sense of expert opinion on that stock.

What is 'Potential Profit %' and how should I interpret it?

Potential Profit % is an estimate of how much a stock's price could increase over a given period, based on the aggregated price targets set by professional analysts. For example, if a stock is currently priced at £100 and analysts have an average target of £120, the potential profit would be 20%. It is important to remember that this is a projection based on expert opinion, not a guarantee. All investments carry risk, and actual returns may be higher or lower than estimated.

15 handpicked stocks

AI Arms Race Explained: Incumbents and Infrastructure

Meta's recent delay of its Avocado AI model highlights the immense difficulty of catching up in the artificial intelligence sector, even with a massive budget. This setback creates a compelling opportunity to invest in the established tech leaders who are maintaining their edge and the infrastructure providers supplying the entire industry.

Han Tan | Market Analyst

Published on March 16

Top Picks from This Group

Here are a few of the assets in this group. Create an account to unlock the full list.

NVIDIA Corporation

NVDA

Current price

$183.22

Nvidia is the primary AI infrastructure provider, supplying the critical GPU hardware required to train massive foundational models.

Microsoft Corporation

MSFT

Current price

$399.95

Microsoft is maintaining its edge in the AI arms race by deeply integrating OpenAI's foundational models across its enterprise software suite.

Alphabet Inc (Google)

GOOGL

Current price

$305.56

Alphabet develops its own foundational AI models and provides the massive cloud computing infrastructure necessary to train them.

Meta Platforms Inc (Facebook)

Your Basket's Financial Footprint

This basket's total market capitalisation is 17,481,762.146 and is heavily anchored by a small number of very large-cap constituents. That large-cap dominance gives the basket a generally stable, broad-market-like profile rather than a high-volatility growth profile.

Key Takeaways for Investors:

Large-cap dominance tends to reduce volatility, increasing stability and making performance reflect broader market moves.
Consider this basket as a core, long-term holding rather than a speculative, high-risk trade.
Prefer steady long-term value; rapid, short-term gains are less likely given the large-cap weighting.

Total Market Cap

NVDA: $4.38T
MSFT: $2.94T
GOOGL: $3.65T
Other

12 Month Growth Potential

Use the growth calculator to see how much investing in these assets could return over one year, based on aggregated analyst sentiment provided by Refinitive Ltd.

If you invested across these assets:

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In 12 months it might be worth:

$1,000.00

+22.52%

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About This Group of Stocks

Our Expert Thinking

Meta's struggle to catch up in AI, despite spending $135 billion, shows that being first really matters. Early movers like Google and Microsoft have built advantages that are hard to replicate overnight. This group captures both the established software leaders holding that edge and the hardware and infrastructure companies supplying the entire industry with the tools it needs to compete.

What You Need to Know

This is a growth-oriented group of stocks, which means it is focused on long-term opportunity rather than short-term income. The companies here span software, semiconductors, networking, data centres, and cloud infrastructure. Because AI is a fast-moving space, these stocks can be more sensitive to news and market shifts, so this group suits investors who are comfortable with some level of price movement in exchange for potential upside.

Why These Stocks

Each stock was handpicked by professional analysts in direct response to the news around Meta's AI delays. The selection focuses on companies that are either leading the development of foundational AI models or are indispensable suppliers of the hardware and infrastructure required to build them. These are not random picks — they represent the key players across the entire AI value chain.

Group Performance Snapshot

22.52%

Average 12 Month Profit

On average, analysts expect assets in this group to grow 22.52% over the next year.

14 of 15

Stocks Rated Buy by Analysts

14 of 15 assets in this group are rated Buy by professional analysts.

Source: Analyst sentiment is provided by Refinitiv Ltd, a global leader in financial market data with over 40k business clients. Refinitiv Ltd is an independent third party to Nemo. This is not advice.

Why You'll Want to Watch These Stocks

🏆

The Leaders Are Pulling Further Ahead

Meta's $135 billion stumble shows just how hard it is to catch the frontrunners. The companies already at the top are widening their lead, and now could be the moment to back them.

⚙️

Every AI Model Needs This Infrastructure

Behind every AI breakthrough is a chain of chips, memory, data centres, and networking gear. The infrastructure providers in this group are essential to the entire industry, regardless of who wins the software race.

📡

The Spending Wave Is Just Getting Started

Analysts are watching this space closely because the relentless capital being poured into AI competition means sustained, long-term demand for the hardware and platforms in this group.

Get the full story on this Basket. Read our detailed article on its risks and potential.

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AI Arms Race Explained: Incumbents and Infrastructure

Top Picks from This Group

Your Basket's Financial Footprint

12 Month Growth Potential

About This Group of Stocks

Our Expert Thinking

What You Need to Know

Why These Stocks