Shariah funds expand AI exposure beyond Big Tech

While recent strong returns from AI-driven strategies continue attracting Shariah compliant investors, portfolio managers are broadening exposure beyond mega-cap technology stocks to include sectors such as healthcare and industrials.

Expressing caution that market conditions in this sector remain volatile and the trajectory of gains may not be smooth, Invesense Asset Management Portfolio Manager Ahmed Ali further noted that equity markets have also been hit by shifting macroeconomic signals and geopolitical uncertainty.

Among the investment strategy shifts include a focus on smaller players involved in networking, data transmission and other infrastructure functions, often described as the “plumbers of AI”. Asset managers are also identifying industries where AI could materially enhance productivity and accelerate innovation.

Such examples include healthcare, where machine learning tools are increasingly being applied to accelerate laboratory analysis, streamline clinical trials and shorten regulatory approval timelines – potentially bringing new treatments to market faster.

Shariah screening itself also shapes portfolio characteristics. By excluding highly-leveraged firms and conventional financial institutions, Islamic investment frameworks tend to favor companies with stronger balance sheets and higher-quality earnings profiles, noted Ahmed.

“The Shariah universe by nature becomes more quality-driven,” as managers remain cautious about momentum-driven rallies that are not supported by fundamentals.

Despite geopolitical tensions and supply chain concerns, Ahmed expressed confidence in AI as a long-term structural opportunity, where many believe the technology’s adoption across industries is still in its early stages and could continue to generate investment opportunities for years to come.