Reflections on 2025: In markets driven by AI momentum, how can we navigate the disconnect with long-term sustainable investing?

Key takeaways:

• Investing in durable, compounding companies with long-term financial conservatism offers diversification in a landscape of extreme uncertainty.
• An awareness of the broad stakeholder implications of AI, including a focus on the increasing finance needs and circularity of deals.
• The importance of long-term investing, staying the course, following the process and including broader stakeholder analysis into capital allocation.

Overview

The Jupiter Global Leaders Equity strategy looks to invest in high-quality companies that, in our view, are leading the transition to a more sustainable world. We define “leading” through how they behave and the real-world outcome of what they sell.

We take a long-term approach to investing and therefore consider quality in the context of how companies balance the needs of three core stakeholders: the Planet, on which we all depend, People, with whom we all co-exist and Profit, which we all require from our savings.

The Jupiter Global Leaders strategy targets companies that are financially stable, operationally efficient, and have resilient profitability. Strong economic foundations are core to our assessment of long termism, and set a firm foundation for leadership analysis in environmental and social outcomes as well. We look for solid management and stable, visible revenue and profit through varying economic scenarios. They have durable, and typically essential, products or services. For example, we hold companies that include to provide pest control, water treatment, flavour manufacturing, and diagnostics, to name a few. They may not dominate the headlines, but they are leaders in their fields, and offer deep economic sustainability and economic resilience.

Current market conditions

2025 has shown however, these durable compounders are not necessarily rewarded for their financial stability on a market sentiment basis. In our view, this offers long-term investors an attractive opportunity to access some of the best-run global companies who are leaders in their field. As we have seen the S&P 500 increase by 17.9%, and the unprecedented growth of Nvidia – the world’s first company to reach an eye watering $5 trillion valuation, a value greater than the individual GDP of some G7 countries, including Japan and Germany.

Yet within the first week of 2026, we have been reminded of the significant geopolitical uncertainty that markets and the global economy face, with international conflict across the globe, most recently in Venezuela and Iran. With the stark new year reminder of the current complexity of global markets, the reliance in 2025 on just a small number of US mega-cap tech stocks leads us to have strong conviction that diversification, defensiveness, and economic resilience are imperative to long-term investing.

Economic resilience and real world outcomes

Core to the Global Leaders’ approach is the fundamental view that economic sustainability and broader stakeholder outcomes are not mutually exclusive. When we consider the real-world outcomes of capital allocation, it is imperative to understand if a business has a long-term competitive advantage. Understanding the durability of a company’s revenue and profit profile going forwards is important to our conviction on whether it is an attractive investment on a ten-year forward basis. Our starting point is framed around basic questions, such as: is it a consistently well-run company? Can this company afford its debt? Does it generate sufficient cash flow? Cash is the oxygen of a business, so this is crucial. We focus on regulatory, technological and legislative considerations that will impact a company on a long-term basis. This means we have to look through the democratic cycles and think about longer-term systemic risk.

This initial stage is designed to result in a pool of durable and resilient companies, with affordable debt, attractive cash flow and the prospect of high recurring revenue. We then use our proprietary research framework to consider how they balance stakeholder outcomes in the context of their longer capital growth projections.

How do we define quality?

Aggregate portfolio reporting continues to operate on a durable basis. We demonstrate a quality bias by the consistency with which our companies deliver revenue and profitability. On aggregate, the companies have circa 60 times the interest cover – i.e. these companies can service their monthly debt payments 60 times over, leading to a highly defensive position in the context of economic uncertainty.

StyleAnalytics illustrates the Jupiter Global Leaders Strategy’s deep quality bias in the below skyline:

The charts below show 40 quarters of revenue and earnings results of the companies held within the Jupiter Global Leaders portfolio. The baseline is market guidance. As illustrated, these companies have met or consistently beaten guidance quarter-on-quarter for over a decade – including during the pandemic.

REVENUE SURPRISE %

Jupiter Global Leaders average sales surprise is 1.4% to the upside on average over the past decade

Revenue surprise refers to the percentage difference between a company’s actual reported revenue figure in a given quarter relative to consensus expectations. The data shown takes a simple average of the portfolio. No exclusion have been made for extreme outliers, given the quarterly growth in sales is a more stable reporting metric relative to EPS. Note that four companies within the portfolio do not report data on a quarterly basis and do not form part of the available dataset.

Source: Jupiter & Bloomberg, Q3 2015 to Q3 2025. Jupiter Global Leaders Strategy.

EPS SURPRISE %

Jupiter Global Leaders average EPS surprise is 4.3% to the upside on average over the past decade

EPS surprise refers to the percentage difference between a company’s actual reported adjusted EPS in a given quarter relative to consensus expectations. The data shown takes a simple average of the portfolio. Note that the chart excludes extreme outliers. Specifically, where a single stock’s EPS surprise in a single quarter is higher than +90% or less than -90%. A total of seven data points were excluded on this basis, out of a total of 1,272 available data points, representing 0.6% of the dataset. Of these, three were positive surprises and four were negative surprises.

Source: Jupiter & Bloomberg, Q1 2014 to Q3 2025. Jupiter Global Leaders Strategy. Note that four companies within the portfolio do not report data on a quarterly basis and do not form part of the available dataset.

These are economically resilient companies that offer organic compound growth rate of 6%. However, they are out of sentiment favour in a momentum market that is tilted to mega-cap growth characteristics.

Stakeholder outcomes of artificial intelligence

By contrast, we have growing concerns about the increasing nuance complexity with which the leading AI and technology firms are funding their ambitious growth targets.

To date, much of the investment in AI and data centre development has consisted of cash flow. More recently, AI companies are committing capital amounts that require debt financing, increasing leverage.

In a recent memo, Howard Marks commented, “Oracle, Meta, and Alphabet have issued 30-year bonds to finance AI investments. In the case of the latter two, the yields on the bonds exceed those on Treasurys of like maturity by 100 basis points or less. Is it prudent to accept 30 years of technological uncertainty to make a fixed-income investment that yields little more than riskless debt? And will the investments funded with debt – in chips and data centers – maintain their level of productivity long enough for these 30-year obligations to be repaid?”¹

There is also the question of potential for future revenue vulnerability for many of those AI solutions aimed at enhancing corporate productivity where competition is fierce, fast evolving with customer expectations high. While AI-related stocks have shown extraordinary share price performance, we have long held concerns relating to broader stakeholder considerations; driven by the sheer quantum of data centres intended to be built globally.

The Jupiter Global Leaders strategy seeks to integrate the real world outcomes of company revenue and operational activity into the investment analysis. In addition to the highlighted valuation concerns of mega cap tech stocks, we turn to consider the planetary and societal implication of projected growth targets that are driven by market hypothesis of AI ubiquity.

The vast roll out anticipated gives an early indication of an imbalance with planetary and societal outcomes. The projected planetary draw down of the power hungry, water intensive data centres gives practicable concern. For example, Ecolab recently stated that the projected data centre build out will use the equivalent of the total drinking water needs of India.

Hyperscaled, 1 gigawatt data centres reach an area of millions of square feet, or hundreds of acres.

Source: Jupiter & Morningstar. NAV to NAV, gross income reinvested. Representative account for the Global Leaders Strategy net of fees (in USD). Benchmark: MSCI All-Country World Index NR. Morningstar employs midday pricing, which therefore creates a one-day lag in reflecting US market movements. Consequently, performance data for 1 April 2025 and 4 April 2025 are used as proxies for quarter-end and “Liberation Day” valuations, respectively. October rotation: 30th September to 22nd.

Given recent relative performance headwinds, driven by sentiment, not fundamentals, the Strategy is well-positioned to offer an attractive allocation opportunity. The current Price-to-Earnings valuation premium pullback is 79% from its peak. There is increased client interest as defensive compounders offer resilience to concerns about economic disruption, particularly as household affordability issues continue and debt delinquencies increase.

Internalisation of externalities

Through our long termism, we also consider broader catalysts, specifically within the context of internalisation of externalities. Most notably the various carbon border adjustment mechanisms, such as the EU’s CBAM that came into force on 1st January 2026, and the PROVE IT Act (Providing Reliable, Objective, Verifiable Emissions Intensity and Transparency Act) a U.S. legislation, with bi-partisan support, designed to support US trade through collecting data on the carbon intensity of domestic goods.

When we consider these mechanisms in the context of our capital allocation framework, we are able to include the implications of these externalities, for example in the context of CBAM pricing the direct cost of carbon tax. Companies that have sought to mitigate this externality versus their relative peers, have a competitive advantage, in our view. The Jupiter Global Leaders strategy has a carbon footprint 83% lower than the MSCI All-Country World Index per dollar invested. In addition to planetary outcomes, lower carbon supports lower carbon related costs which helps long term profitability.

This notion of stakeholder balance and long-term investing versus the short-term sentiment of the market momentum goes to the nexus of the investment framework, which is why we believe considering these internalisations is key to delivering diversification and durability.

Outlook for 2026 and beyond

Global markets have experienced increasing concentration risk over recent years, amplifying the broader consideration for diversification requirements. There have been episodes that saw 80% of the MSCI-All Country World Index’s absolute return delivered by just seven companies in a constituent index of over 2,500, highlighting the disconnect to long term diversification on a multi-decade horizon.

Towards the end of 2025, we saw a shift in commentary sentiment, as more analysts, market commentators and captains of industry grabbed headlines with discussion of the “AI bubble”. Our caution is evident in the underweight position, which has been challenging on a relative performance basis; however, our cautious position remains in relation to steep valuations, cash burn, increasing leverage required to finance the infrastructure build out, rising costs of powering AI, water intensity, permitting bottlenecks, in addition to the circularity of revenue between key generative AI market participants.

The Global Leaders investment team continue to view the affordability of debt as an ongoing concern for the economy, both at a consumer and a commercial level as we see warning signs in debt delinquencies across multiple sectors. Our longstanding view is that companies with strong balance sheets, robust cash flow generation and durable franchises should be well placed in a market environment defined by tightened interest rates, geopolitical uncertainty and fragmented consumer conservatism.

Given the uncertain global backdrop, we continue to invest for the long term, identifying companies with leading and resilient business models, with a long history of revenue and earnings stability, aligning to positive real-world outcomes.

A spotlight on preventative healthcare

Health outcomes and conviction-led capital allocation are a helpful illustration of the Jupiter Global Leaders Strategy’s investment philosophy. As active investors, we look for high-quality companies that balance the needs of three core stakeholders: planet, people and profit. Our particular style of investing seeks durable and resilient companies that are able to operate across economic cycles.

Investing through the lens of economic resilience first and foremost, the output is that around a quarter of the Global Leaders’ assets under management is invested in companies delivering positive health outcomes. The majority of these companies are focused on preventative healthcare, improving patient outcomes while reducing costs to individuals and/or the state. These companies share common traits – strong balance sheets, resilient cash flows, and a long-term commitment to innovation. They look particularly attractive on both a regulatory and legislative basis as they typically represent a small percentage of the treatment pathway cost but are critical to the patient outcome.

On average, the companies held reinvest around 10% of revenue in research and development and capital expenditure. They’re forward-thinking and built to endure. Examples range from vaccine and diagnostic innovators to firms developing orthopaedic dressings, precision testing, hearing solutions and palliative care services. The speed of innovation from these leading companies in their field is compelling.

Turning to a focus on cancer, nearly 20 million people receive a diagnosis each year⁵ , with survival rates heavily dependent on early detection. Behind every cancer diagnosis lies a series of laboratory tests, many of which have historically been time-consuming and vulnerable to manual error. AI and automation are now transforming this environment, turning what were once bottlenecks into engines of efficiency.

Agilent Technologies, a core holding within the strategy, has delivered fourfold productivity gains in sample processing, analysing 100 samples in under 25 minutes⁶ , helping clinicians provide earlier, more informed diagnoses. These efficiency gains translate directly into shorter patient waiting times and more dependable testing environments.

Agilent’s strengths also span genomics and next-generation sequencing, which are both central to modern oncology. The company’s tools help researchers identify critical biomarkers underpinning diseases such as lymphoma, enabling the development of targeted therapies for conditions characterised by complex, heterogeneous genetic profiles.

Danaher, a global leader in diagnostic technologies, high-content imaging systems allow analysis up to 40 times faster than traditional methods, giving clinicians deeper insight into tumour structures and accelerating clinical decision-making. The company now facilitates more than nine billion diagnostic tests a year, including

1.6 million cancer tests every week - evidence of both scale and life-changing impact.

In addition to the economic rationale for investment, many of these firms support positive social outcomes. One of the Global Leaders’ investments, Cochlear, is a specialist Australian company that manufactures cochlear implants. This firm supports both the outcomes of congenital deafness in children, as well as degenerative deafness in the elderly, with measurable economic benefits across both patient cohorts. Another stock, Chemed that’s held is a market leader in palliative care, which gives terminally ill patients care in the comfort of their own home, supporting their dignity and comfort in the last weeks of life.

The Jupiter Global Leaders strategy invests in globally leading companies that - in our view - are at the forefront of the transition to a more sustainable world through how they operate and the real-world outcome of what they sell. The healthcare-related companies held in the portfolio meet these criteria. They have attractive profitability, strong market positioning, and long-term durability in the delivery of real-world positive social outcomes.

Footnotes

¹ “Is it a bubble?” 9 December 2025; Oaktree Capital Insights

² IEA: Electricity 2024: Analysis and forecast to 2026;

³ Goldman Sachs “Generational growth: AI/data centers’ global power sure and sustainability impact”; April 2024

⁴ Morgan Stanley Global Insight: Global Data Centers: Sizing & Solving for CO2; September 2024

⁵ American Cancer Society, Global Cancer Facts & Figures 5th Edition

⁶ AI Peak Integration for MassHunter software automates manual peak integration during the data analysis process in GC/SQ

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