Text transcript

Welcome to Advisor to Go, brought to you by CIBC Asset Management, a podcast bringing advisors the latest financial insights and developments from our subject-matter experts themselves. 

* * * 

Leslie Alba, head of portfolio solutions, total investment solutions, CIBC Asset Management 

* * * 

Through the latter half of this year, our team at CIBC Asset Management is paying close attention to tariffs, policy relief and oil prices, especially in the context of their potential impact on GDP, unemployment and inflation. 

With respect to tariffs, markets seem to be pricing in more certainty now than they did earlier this year. 

You know, equity markets have been resilient following the volatility we experienced at the beginning of April. And with the 2026 midterm elections approaching, the U.S. does have strong incentives to finalize trade agreements sooner than later to alleviate economic pressures, but also to secure political wins ahead of the elections. 

So, our team expects a flurry of announcements this summer, including a comprehensive trade and political agreement with Canada. 

Policy relief is another area we’re monitoring closely through the rest of the year. Most countries, aside from the U.S., are delivering synchronized and important fiscal and monetary stimulus, which is really helping to offset the economic drag of tariffs. 

Also, lower oil prices and disinflationary trends outside the U.S. provide some room for central banks to cut interest rates without fueling inflation. Where we do see the most significant tariff-related headwinds is in the U.S., where we project a 1% GDP drag over the next 12 months, though this will likely result in federal rate cuts later this year, but not enough really to offset that drag. 

* * * 

The global macroeconomic backdrop remains broadly supportive of equities, and that’s really driven by several key factors, including fiscal and monetary policy offsetting tariff headwinds, reduced policy uncertainty leading to improved risk sentiment in markets, and if The Federal Reserve does resume rate cuts, this should support both equity valuations and global activity.  

However, the balance of risk is skewed to the downside, and so within our managed solutions, we maintain a measured near-term view. 

Many major equity markets are above the levels we saw before the U.S. election. So to put things into perspective, the TSX Composite Index and the S&P 500 Index closed the second quarter of 2025 at record levels — and that’s in local dollar terms. Meanwhile, MSCI Europe Index was not far from its previous peak. 

So, what we’re seeing is current valuations that imply a pretty benign outcome, despite persistent macro and policy risks. And therefore, if downside scenarios do materialize, particularly around trade disruptions or policy missteps, equity corrections could be significant, with U.S. markets likely to be the most vulnerable given their elevated starting point. 

Over the near term, we see a more favourable equity outlook outside of the United States — particularly in Canada, Europe and emerging markets. Canadian equities are well positioned for relative outperformance as domestic growth accelerates amid a U.S. slowdown. And then in Europe, we have improving medium-term prospects, and that’s being driven by supportive fiscal and monetary policies, and should lift equity markets. 

And then we also remain constructive on emerging market equities. And that’s supported by a weaker U.S. dollar, historically being a tailwind for emerging market performance. But also, we see continued strength in the global tech cycle, the lagged effects of earlier emerging market rate cuts, and lower oil prices. In addition to that, The Fed’s easing cycle should provide emerging market central banks with more room to cut, further supporting growth and equity returns in those markets. 

And then on the bond side, so, thinking about fixed-income markets, 10-year government bonds, especially U.S. Treasuries, remain attractive. They continue to offer relatively elevated yields, which could decline looking ahead, and lead to outperformance of U.S. Treasuries versus other bonds. 

* * * 

Our long-term orientation for markets remains risk-on, with equities continuing to be the cornerstone for wealth generation. 

Our outlet for equities includes the view that over long term, U.S. companies will remain exceptional, but that the spread between U.S. and the rest of the world will narrow. We’re observing growing signs of moderation in U.S. exceptionalism, particularly outside of mega-cap tech stocks.  

And while innovation-led returns — so returns from AI, for example — remain a powerful structural driver of U.S. market returns, the breadth of U.S. equity leadership continues to narrow. Also, valuations remain stretched, and the earnings premium, relative to rest of the world, is compressing. 

Meanwhile, when we look across to Europe, it appears to be at the inflection point and potential start at the end of secular stagnation, starting with near-term policy support, though this support could have longer lasting effects on its economy and markets if we see a fundamental shift in the region’s attitude towards debt.  

And then, when we look to China, China’s ascent in technology, manufacturing, particularly in electric vehicles, solar and AI infrastructure, there are signals that we could be moving towards a more multipolar investment environment. 

And although risks to investing in China remain high, the country is clearly reshaping global competitive dynamics. News from DeepSeek earlier this year is a pretty humbling reminder that technology and innovation can emerge outside the United States. 

We also maintain the long-term view that bonds are an important ballast in investors’ portfolios. So although yields have come down from their peaks in 2023, they remain relatively higher than levels seen over much of the last decade [or] decade and a half. 

The diversification potential of bonds should shine through amid economic headwinds and equity market weakness, given that the higher coupons that are offered today should create some buffer for portfolio returns. 

Also, what we find through our research is that long-term bond returns tend to closely follow the starting yield, and all-in yield today remains relatively attractive, so bonds are an important component of balanced portfolios. 

* * * 

Our view is that investors should continue to position their portfolios in line with their long-term investment objectives, and in consideration of any investment constraints. Our long-term view on equity and fixed-income markets is broadly constructive, and so we recommend remaining fully invested. History does remind us that leadership — whether across regions, sectors, strategies or asset classes — is rarely permanent. 

And so because of that, practical patience, selective positioning and disciplined diversification will remain central to portfolio construction through the second half of 2025 and beyond. And we believe that that approach of diversifying the portfolio, remaining fully invested with bonds being a ballast, really does equip the portfolio to navigate volatility while maintaining long-term opportunity capture.

* * *

This program is intended for Advisor Use Only. The views expressed in this material are the views of CIBC Asset Management Inc., as of the date of publication unless otherwise indicated, and are subject to change at any time. CIBC Asset Management Inc. does not undertake any obligation or responsibility to update such opinions. This material is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice, it should not be relied upon in that regard or be considered predictive of any future market performance, nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this material should consult with their advisor. Forward-looking statements include statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “estimates”, or other similar wording. In addition, any statements that may be made concerning future performance, strategies, or prospects and possible future actions taken by the fund, are also forward-looking statements. Forward-looking statements are not guarantees of future performance. These statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results and achievements of the fund to differ materially from those expressed or implied by such statements. Such factors include, but are not limited to: general economic, market, and business conditions; fluctuations in securities prices, interest rates, and foreign currency exchange rates; changes in government regulations; and catastrophic events. The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. CIBC Asset Management Inc. does not undertake, and specifically disclaims, any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments, or otherwise prior to the release of the next management report of fund performance. Past performance may not be repeated and is not indicative of future results. The material and/or its contents may not be reproduced without the express written consent of CIBC Asset Management Inc. ^® The CIBC logo and “CIBC Asset Management” are registered trademarks of CIBC, used under license.

A potential slowdown in the U.S. due to tariff-related headwinds and economic uncertainty is making Canada, Europe and emerging markets more attractive to investors, says Leslie Alba, head of portfolio solutions, total investment solutions, CIBC Asset Management.

“We see a more favourable equity outlook outside of the United States, particularly in Canada, Europe and emerging markets,” she said.

“Canadian equities are well positioned for relative outperformance as domestic growth accelerates amid a U.S. slowdown. And then in Europe, we have improving medium-term prospects, and that’s being driven by supportive fiscal and monetary policies, and should lift equity markets.”

Listen to the full conversation on the Advisor To Go podcast, powered by CIBC Asset Management.

Alba said she is constructive on emerging markets due to a weaker U.S. dollar.

“We see continued strength in the global tech cycle, the lagged effects of earlier emerging market rate cuts, and lower oil prices,” she said. “The Fed’s easing cycle should provide emerging market central banks with more room to cut, further supporting growth and equity returns in those markets.”

Alba said longer term, U.S. companies would remain “exceptional” but spreads would narrow.

“While innovation-led returns — so, returns from AI, for example — remain a powerful structural driver of U.S. market returns, the breadth of U.S. equity leadership continues to narrow,” she said. “Also, valuations remain stretched, and the earnings premium relative to rest of the world is compressing.”

Alba said China remains a key player on the tech front, particularly in electric vehicles and solar power. And a breakthrough in AI by the Chinese firm DeepSeek further underscores the country’s tech strength.

“Although risks to investing in China remain high, the country is clearly reshaping global competitive dynamics,” she said. “News from DeepSeek earlier this year is a pretty humbling reminder that technology and innovation can emerge outside the United States.”

Bonds remain an important part of balanced and diversified portfolios, Alba added. “Bonds should shine through amid economic headwinds and equity market weakness, given that the higher coupons that are offered today should create some buffer for portfolio returns.”

Specifically, she said 10-year government bonds, including U.S. Treasuries, are attractive. “They continue to offer relatively elevated yields, which could decline looking ahead, and lead to outperformance of U.S. Treasuries versus other bonds.”

Overall, investors should remain patient, Alba said, and focus on selective positioning and diversification through the latter half of the year.

“That approach of diversifying the portfolio, remaining fully invested with bonds being a ballast, really does equip the portfolio to navigate volatility while maintaining long-term opportunity capture.”

Key macroeconomic indicators

There are several economic factors that Alba is paying attention to, which will shape global economies through 2025. The outcome of tariffs, policy relief and oil prices will impact GDP, unemployment and inflation across the world.

“Where we do see the most significant tariff-related headwinds is in the U.S., where we project a 1% GDP drag over the next 12 months, though this will likely result in federal rate cuts later this year, but not enough really to offset that drag,” she said.

Meanwhile, countries outside the U.S. are planning to deliver fiscal and monetary stimulus, which will offset any economic slowdown from tariffs on those countries, she said.

“Also, lower oil prices and disinflationary trends outside the U.S. provide some room for central banks to cut interest rates without fueling inflation,” she said, adding that as the global macroeconomic backdrop improves, risk sentiment in markets will likewise improve.

This article is part of the Advisor To Go program, sponsored by CIBC Asset Management. The article was written without input from the sponsor.

Text transcript

Welcome to Advisor to Go, brought to you by CIBC Asset Management, a podcast bringing advisors the latest financial insights and developments from our subject-matter experts themselves. 

* * * 

Greg Zdzienicki, vice president, client portfolio manager, equities, CIBC Asset Management 

* * * 

The low-volatility effect is a term that’s used to describe the observation that stocks with lower price volatility historically have generated higher returns than stocks with higher price volatility. 

And this was first researched by academics decades ago as an anomaly of conventional asset pricing theory. It observed that stocks that have lower price volatility historically have generated higher returns than those with higher price volatility. And investing approaches that sought to exploit this low-volatility effect started to gain a lot of prominence, particularly after the 2008 global financial crisis, as investors sought a less volatile investment experience. 

Low-volatility strategies offer a defensive investment approach, and they can lower a portfolio’s sensitivity to movements in the overall stock market, also known as beta, thereby reducing their overall volatility and enhancing risk-adjusted returns over the long term. 

* * * 

Low-volatility strategies are protected during significant market dislocations. You know, if we go back over the years and take a look back to the tech bubble, where we had a valuation issue, multiples got expensive, MSCI World Index was down about 20%, the S&P Global Low Vol Index was actually up about 3% during that period of time, really protecting on the downside. 

If we fast forward to the financial crisis in 2007 to 2009, and this was an issue that was caused by a debt crisis, we had the MSCI World Index down about 32%. Low-vol strategies down just less than half of that during that same period of time. And if we move forward to 2022 when we saw volatility come back, the MSCI World Index [was] down about 13%, with the S&P Global Low-Vol Index down only 1%. 

So during these market dislocations, whether it was a valuation response by the markets, whether it was a response to a debt crisis, or whether it was a response to a pullback in volatility, like we saw in 2022, low-volatility strategies have protected on the downside and offered investors diversification while maintaining long-term equity market exposure. 

* * * 

So far throughout 2025, we’ve had a number of different investment environments. We started off the year with a lot of volatility. In January, when tariffs were announced, the market did see a tremendous amount of volatility. The performance of low-volatility strategies during the tariff troubles that we saw in the beginning of 2025 was exactly what we’d have expected it to be. 

In Canada, low-volatility strategies were down about 2% to 4%, whereas the index was down about 12%, 12.5% during that same period. In the U.S., we saw a very similar type performance: S&P 500 down 18%, 19% during that period of time, whereas low-volatility strategies were down closer to 6%. And in international markets, we saw the same phenomena as well. When we look at international markets down about 13% during the tariff trouble period, the low-volatility strategy is down closer to 5%. Across all regions, whether international, U.S. or Canadian, we saw low-volatility strategies perform exactly as expected, protecting investors on the downside. 

* * * 

At CIBC, we combine our low-volatility strategies with dividends. And by combining dividends with low volatility improves the sustainability and visibility of a portfolio’s cash flow stream. So the largest impact to these low-volatility strategies, of course, is going to be volatility. As the VIX moves up or the volatility index starts to move up, these strategies tend to show their defensive characteristics. These strategies that are coupled with dividend-paying stocks also tend to resemble characteristics of quality, high cash flow and good profitability. 

* * * 

Low-volatility strategies play a very important role for long-term strategic asset allocation. 

First of all, they have a smoother return profile. So allocating the low-volatility equities can lead to a more stable return profile, aiding investors in achieving those long-term goals, while protecting capital during market downturns. They also have enhanced diversification. This tends to improve diversification when integrated into various investment styles, be it growth, value or core. 

When added to a portfolio, low-volatility strategies improve capital preservation and recovery times. They have the potential to provide better capital preservation, and they facilitate faster recovery in uncertain market conditions, making them an attractive option for risk-averse investors. And low-volatility strategies have historically outperformed during market corrections, providing better risk-adjusted returns, lower downside capture, which makes them a valuable complement to traditional portfolio strategies. 

* * * 

By using low-volatility strategies for risk reduction, clients are still maintaining long-term equity exposure. Whereas an allocation to fixed income can provide risk reduction in a portfolio and smoothen out a return profile, it does not provide that long-term equity exposure that some investors need in their portfolio to achieve those long-term goals. 

Low-volatility strategies, by their nature, tend to invest in more defensive industries. When we look at the sector exposures and say, at a Canadian low-volatility dividend ETF, there’s going to be significant exposure to areas like financials, utilities, consumer staples, communication services. These are areas of the market that tend to exhibit these lower-volatility characteristics. These are also areas of the market that tend to have better cash flows, higher profitability and tend to pay dividends. Areas of the market, for example, information technology, consumer discretionary, materials in Canada will be underrepresented within a low-volatility ETF. 

If we take a look at the U.S., we do see a significant difference between the exposure to the broad market and a low-volatility dividend ETF. And that is what really drives that diversification benefit. Low-volatility ETFs in the U.S. will be overweight consumer staples, overweight financials, overweight utilities, and will have a meaningful underweight to areas such as consumer discretionary [and] information technology. 

So particularly in the U.S., where we’ve seen a lot of leadership from the Magnificent Seven or the Great Eight — we saw technology lead and becoming substantial part of the index — low-volatility ETFs in the U.S. are going to look very different than the benchmark, again, continuing to deliver those diversification benefits and protection during downturns in the market. 

Internationally, we will see very similar type exposures, and again, we will have less exposure to areas like technology, materials and consumer discretionary.  

When we look at low-volatility ETFs, and we take a look at the market cap that they invest in, if it’s Canada or an international ETF, the majority seems to be clustered in that $10 to $50 billion market-cap range. In the U.S., we’re probably more in the $50 to $100 billion, with significant exposure as well in companies over $100 billion.

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This program is intended for Advisor Use Only. The views expressed in this material are the views of CIBC Asset Management Inc., as of the date of publication unless otherwise indicated, and are subject to change at any time. CIBC Asset Management Inc. does not undertake any obligation or responsibility to update such opinions. This material is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice, it should not be relied upon in that regard or be considered predictive of any future market performance, nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this material should consult with their advisor. Forward-looking statements include statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “estimates”, or other similar wording. In addition, any statements that may be made concerning future performance, strategies, or prospects and possible future actions taken by the fund, are also forward-looking statements. Forward-looking statements are not guarantees of future performance. These statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results and achievements of the fund to differ materially from those expressed or implied by such statements. Such factors include, but are not limited to: general economic, market, and business conditions; fluctuations in securities prices, interest rates, and foreign currency exchange rates; changes in government regulations; and catastrophic events. The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. CIBC Asset Management Inc. does not undertake, and specifically disclaims, any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments, or otherwise prior to the release of the next management report of fund performance. Past performance may not be repeated and is not indicative of future results. The material and/or its contents may not be reproduced without the express written consent of CIBC Asset Management Inc. ^® The CIBC logo and “CIBC Asset Management” are registered trademarks of CIBC, used under license.

Low-volatility ETFs tend to beat their benchmarks during periods of market dislocation, says Greg Zdzienicki, vice-president, client portfolio manager, equities, CIBC Asset Management. 

In a June 27 interview, Zdzienicki said low-vol funds have proven their value time and time again in recent market turbulence.

During the tech bubble, for example, the MSCI World Index was down about 20%, while the S&P Global Low Volatility Index was up about 3%. And during the financial crisis from 2007 to 2009, the MSCI World Index was down about 32%, while low-volatility strategies were down about half of that.

Listen to the full conversation on the Advisor To Go podcast, powered by CIBC Asset Management.

More recently this year, when tariff uncertainty hit markets, low-volatility strategies in Canada were down between 2% and 4%, while the index was down about 12%, Zdzienicki said. In the U.S., the S&P 500 was down about 18%, while low-volatility strategies were down about 6% during that same period.

“Across all regions, whether international, U.S. or Canadian, we saw low-volatility strategies perform exactly as expected, protecting investors on the downside,” he said.

The ability to provide better capital preservation and faster recovery in uncertain market conditions makes low-volatility ETFs “an attractive option for risk-averse investors,” he said. “They also have enhanced diversification. This tends to improve diversification when integrated into various investment styles, be it growth, value or core.”

Zdzienicki said when it comes to sectors, Canadian low-volatility dividend ETFs tend to have more exposure to financials, utilities, consumer staples and communication services. These sectors have lower volatility characteristics and “tend to have better cash flows, higher profitability and tend to pay dividends.”

Meanwhile, information technology, consumer discretionary and materials will be underrepresentend in Canadian low-volatility dividend ETFs, he said.

“If we take a look at the U.S., we do see a significant difference between the exposure to the broad market and a low-volatility dividend ETF,” Zdzienicki  said. “And that is what really drives that diversification benefit.”

Low-volatility ETFs in the U.S. are overweight consumer staples, financials, and utilities, and underweight consumer discretionary and information technology, he added.

“Internationally, we will see very similar type exposures, and again, we will have less exposure to areas like technology, materials and consumer discretionary,” Zdzienicki  said.

And when it comes to market cap, he said Canadian and international ETFs are in the $10 [billion] to $50-billion range, while U.S. ETFs are in the $50 [billion] to more than $100-billion range.

Overall, investors seeking a more stable return profile to reach long-term goals should consider low-volatility ETFs, Zdzienicki  advised.

“Low-volatility strategies offer a defensive investment approach, and they can lower a portfolio’s sensitivity to movements in the overall stock market, also known as beta, thereby reducing their overall volatility and enhancing risk-adjusted returns over the long term,” he said.

This article is part of the Advisor To Go program, sponsored by CIBC Asset Management. The article was written without input from the sponsor.

AI has the potential to completely revolutionize the investment industry, says Greg Gipson, managing director and head of exchange-traded funds at CIBC Global Asset Management. But integrating it into ETF portfolios involves three key challenges.

“AI has the power to transform ETF strategy,” he said in a June 20 interview, helping to define what goes into an ETF, how portfolios are put together, and how risk is managed and monitored.

Listen to the full conversation on the Advisor To Go podcast, powered by CIBC Asset Management.

According to Gibson, AI will power portfolio construction in ways that were previously unimaginable.

“AI is able to process large amounts of data, unstructured data and alternative data sources, which just really enables a richer and more contextual approach to selecting the components that go into an ETF,” he said.

And while AI can be cost efficient and could help businesses scale more efficiently, Gipson said, there are still some hurdles to clear.

First, there needs to be a structured database that AI techniques can access, he said.

“As important as the machine learning or AI-based approach is, I would argue that even more important is data acquisition, data cleansing and data storage,” he said.

Second, it’s important to understand how the AI model analyzes data, Gipson said. “Without understanding what the model does, interpreting the output can both be challenging, and also lead to incorrect assumptions about what is being recommended.”

To combat this challenge, there is a burgeoning field called XAI — or explainable AI — that would explain the rationale of AI recommendations.

A third challenge involves the implementation costs to acquire data, he said.

“The actual software or processes to run these types of analysis is increasingly commoditized,” he said. “But the cost upfront to be ready to use those types of techniques should not be underestimated by any business or any user.”

Opportunities in ETFs

There are several opportunities for investors who want to benefit from the use of AI in ETFs. He described the easiest path as simply to invest in an ETF that is focused on companies that utilize AI, Gipson said.

“Think of these as thematic ETFs, where an AI or machine learning-based process is able to determine those securities that have a particular correlation or particular exposure to something like AI or data centres,” he said. “That understanding allows the ETF manufacturer, ETF manager, to create a vehicle — an ETF — that then is offered to investors to gain exposure to an area of the market that they may otherwise not be aware of.

Another opportunity is around data processing, he said.

“There are massive, massive increases in the amounts of data. It’s often fragmented, it’s unstructured, it’s alternative, it’s sitting in spreadsheets or PDFs. And really what AI allows is that automation of data consumption, and then also a clean and efficient and structured way of analyzing fragmented data.”

This is particularly important in areas where information is sparse, like when considering emerging market conditions or commodities.

“Often this data sits in an environment that’s not necessarily conducive to a systematic review or incorporation of the data into a process,” he said.

Gipson said despite the uncertainties, the AI future is bright.

“In my opinion, the outlook for integrating artificial intelligence into ETF portfolio construction is truly exciting,” he said. “The next wave of really building and developing, curating unique solutions for investors lies in the ability to leverage artificial intelligence, leverage the power of machine learning to create a more customized solution that meets individual investor needs.”

This article is part of the Advisor To Go program, sponsored by CIBC Asset Management. The article was written without input from the sponsor.

Text transcript

Welcome to Advisor to Go, brought to you by CIBC Asset Management, a podcast bringing advisors the latest financial insights and developments from our subject-matter experts themselves. 

* * * 

Greg Gipson, managing director and head of exchange-traded funds at CIBC Global Asset Management 

* * * 

AI has the power to transform ETF strategy. It’s really along three main dimensions. First, what goes into the ETF or the security selection. Two, how do you put it together, or portfolio construction. And three, how to monitor the ETF, or risk management. 

On the first part, in regards to what goes into an ETF, it’s important to remember that many AI processes, machine learning, etc., are really focused on pattern recognition and data analysis. So AI is able to process large amounts of data, unstructured data and alternative data sources, which just really enables a richer and more contextual approach to selecting the components that go into an ETF. 

On the portfolio construction side, there’s many existing approaches around portfolio optimization, risk-based optimization. Machine learning models can really add value to how you put things together or how you build a portfolio, and enables you to really have a real-time adaptation to what’s going on in the market, and is able to improve the responsiveness to which portfolio managers can adjust their holdings. 

On the risk management side, this is another important aspect for ETFs, and really for all funds in that, again, AI focused on that ability to recognize patterns, identify correlations, identify anomalies in data, and really act as an early warning sign for the human analyst or the risk department to understand what underlying risks are in the ETF, what underlying risks exist in the market, and the negative impact that that could have on the performance of the ETF itself. 

* * * 

Innovation in asset management, as it relates to incorporating artificial intelligence or machine learning, really has the ability to transform the way that businesses are run. 

So, first and foremost, if you think about the types of techniques that AI encompasses, many of them have been around for decades. 

The difference now really is twofold. One is the massive, massive increase in the amount of data or information that is available to investors. And two is the computing power, so the ability to process those large amounts of data. And what that enables asset managers, portfolio managers to do is really have a much richer or more thoughtful, more inclusive approach to predictive analytics, and really focusing on developing and designing customized solutions for investors. 

So that ability to really focus on the areas of the market that are driving performance, the ability to stratify investments, to really allow that targeted approach, targeted exposure, for investors to gain access to. And from an overall business perspective, obviously there’s the cost efficiency output, where really allowing the automation of processes, automation of data, automation of trade execution, automation, automation! Automation as the ability for business to scale systematically is more efficient than scaling through human capital.  

* * * 

The opportunities in ETFs for investors as it relates to AI are along a number of dimensions. So clearly, the easiest one would be investing in an ETF that is focused on investing in companies that would benefit from the AI revolution. 

But maybe a bit more detail on that is really the ability for AI to discern or distill the areas of the market that are driving performance. So think of these as thematic ETFs, where an AI or machine learning-based process is able to determine those securities that have a particular correlation or particular exposure to something like AI or something like data centers. And then that understanding allows the ETF manufacturer, ETF manager, to create a vehicle — an ETF — that then is offered to investors to gain exposure to an area of the market that they may otherwise not be aware of. 

Another opportunity in ETFs for investors is around the processing of data. So, as we mentioned earlier, there are massive, massive increase in the amounts of data. It’s often fragmented, it’s unstructured, it’s alternative, it’s sitting in spreadsheets or PDFs. And really what AI allows is that automation of data consumption, and then also clean and efficient and structured way of analyzing fragmented data. And this is particularly important in areas where information is more sparse. So if you think of areas like emerging markets, if you think of areas like commodities, right? Because often this data sits in an environment that’s not necessarily conducive to a systematic review or incorporation of the data into a process. 

* * * 

Integrating AI into ETF portfolios, or really any investment management process faces a number of unique and specific issues that need to be addressed. First and foremost is what goes into the model. So think of this as data quality. So the old adage “garbage in, garbage out” would apply to AI model use as well. 

So as important as the machine learning or AI-based approach is, I would argue that even more important is data acquisition, data cleansing and data storage. So just having a structured database that the machine-learning techniques or AI techniques can then access is paramount to success, and paramount to gaining recognition and appreciation by the end user. 

Another challenge that AI faces is in how it analyzes data. This is really focused around that black-box mentality. And one of the main challenges that these types of techniques have — or really any quantitative process can have — is around transparency. So there’s a field of AI called XAI, or explainable AI, super interesting, and it really seeks to provide more of an explanation as to what the model actually does. And this is important, because without understanding what the model does, interpreting the output can both be challenging, and also lead to incorrect assumptions about what is being recommended. 

A third challenge that any business faces is around implementation costs. When implementing artificial intelligence into an investment management process or ETF portfolio construction, one should not underestimate the cost associated with acquiring data and structuring data. I would again say that this is the single most important facet of a successful artificial intelligence or machine learning process is in data, data, data. 

The actual mechanics, the actual software or processes to run these types of analysis is increasingly commoditized, but the costs upfront to be ready to use those types of techniques should not be underestimated by any business or any user. 

* * * 

In my opinion, the outlook for integrating artificial intelligence into ETF portfolio construction is truly exciting. I see that the next wave of really building and developing, curating unique solutions for investors lies in the ability to leverage artificial intelligence, leverage the power of machine learning to create a more customized solution that meets individual investor needs.

**

This program is intended for Advisor Use Only. The views expressed in this material are the views of CIBC Asset Management Inc., as of the date of publication unless otherwise indicated, and are subject to change at any time. CIBC Asset Management Inc. does not undertake any obligation or responsibility to update such opinions. This material is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice, it should not be relied upon in that regard or be considered predictive of any future market performance, nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this material should consult with their advisor. Forward-looking statements include statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “estimates”, or other similar wording. In addition, any statements that may be made concerning future performance, strategies, or prospects and possible future actions taken by the fund, are also forward-looking statements. Forward-looking statements are not guarantees of future performance. These statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results and achievements of the fund to differ materially from those expressed or implied by such statements. Such factors include, but are not limited to: general economic, market, and business conditions; fluctuations in securities prices, interest rates, and foreign currency exchange rates; changes in government regulations; and catastrophic events. The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. CIBC Asset Management Inc. does not undertake, and specifically disclaims, any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments, or otherwise prior to the release of the next management report of fund performance. Past performance may not be repeated and is not indicative of future results. The material and/or its contents may not be reproduced without the express written consent of CIBC Asset Management Inc. ^® The CIBC logo and “CIBC Asset Management” are registered trademarks of CIBC, used under license.

Text transcript

Welcome to Advisor to Go, brought to you by CIBC Asset Management, a podcast bringing advisors the latest financial insights and developments from our subject-matter experts themselves. 

* * * 

Aaron White, executive director and head of sustainable investments at CIBC Asset Management 

* * * 

Let’s start with the biggest trend facing the sustainable investment landscape today: the changing regulatory and policy environment around climate and ESG policies. 

Over the past decade, we saw a surge in commitments to net-zero goals. But over the last year, we’ve seen a noticeable shift. Some companies and market participants, like asset managers and pension plans, are pulling back from their net-zero pledges and/or their affiliations. This is largely due to the lack of clarity around the regulatory frameworks, and uncertainty in how they may be held accountable for ambitious targets that they might not meet. This is compounded by unsupportive policy and legislation that is rising in the United States, creating further uncertainty for industry participants. 

This important reaction for investors is now more important than ever to understand corporate and industry action under a backdrop of less clarity. Evaluating how participants are reacting to the material impacts to their business or portfolio, and not simple checkmarks for their targets, commitments and affiliations. This is much more complex, and requires a significant amount of attention to direct action at the company or the plan that you’re evaluating. 

This brings us to the next important trend: concerns around continued policy support for the transition to a low-carbon economy. 

Governments worldwide are grappling with competing priorities, the economic recovery from Covid and rising inflation, energy security and climate action. The question is, will policy support remain strong, or will we see a continued rollback in incentives and regulations? For businesses, this uncertainty makes long-term planning incredibly challenging. And for investors, [it] creates greater uncertainty around the realities of transition risk in portfolios. 

Meanwhile, we’re also seeing in the United States, diversity, equity and inclusion initiatives are coming under fire. Some industry leaders are questioning the impact of these programs, particularly in light of the political and social pushback. Organizations are pivoting to measuring how DEI initiatives deliver positive financial outcomes, and ensuring that these efforts are creative to business and investment success. 

It’s clear that diverse sources of thought drive better decision-making. And so, as investors, we’re increasingly having to understand how our portfolio companies are reacting to this legislation and pushback, and ensuring that DEI policies remain positive and accretive to the business success in this new environment. 

And then, finally, there’s also COP30, the next major United Nations Climate Conference set to take place in Brazil later this year. As countries prepare to submit new nationally determined contributions — or NDCs — there’s growing concern that we’re falling behind on global climate goals, while waiting to see whether COP30 will bring ambitious new targets, or whether we’ll see reduced ambition in the face of political and economic pressures. All this while the United States has pulled out of the Paris Agreement and, in essence, the COP process.  

The stakes could not be higher, and we approach significant milestones in our ambition for net zero, and the outcomes will shape the trajectory of climate action for years to come. 

It’s clear that we’re at a crossroads in sustainability policy, and the decisions made today — whether it’s doubling down on disclosures and transparency, strengthening DEI initiatives, or setting bold climate targets — will have significant implications for companies and investors. As investors, it will be important in this environment of uncertainty to remain measured in our approach, and to stay focused on portfolio materiality. 

* * * 

We’re currently focused on three major opportunities that investors should be looking out for in today’s market. 

Firstly, nuclear energy is in the midst of a renaissance. As part of the energy transition, policy makers are pivoting focus to nuclear energy to play a significant role in a secure pathway to net zero. And the market is anticipating that project capacity will nearly double by 2050. 

Several intergovernmental panel on climate change scenarios also call for similar or greater amount of nuclear energy capacity growth by 2050. And as of 2022, nuclear power has displaced nearly 70 gigatons of emissions globally, and with supportive policy will be a key driver for further emissions reductions moving forward. 

We saw this policy commitment at COP28 with 20 countries, including Canada, committing to tripling nuclear energy capacity by 2050 by mobilizing investment, ensuring strong oversight and safety standards, and supporting the development and construction of necessary infrastructure. 

Domestically, we’ve seen policy support accelerate through the inclusion of nuclear energy in Canada’s Green Bond Framework, and, more recently, a roadmap for increased investment in the Canadian nuclear industry released by Natural Resources Canada in March of 2025. 

While concerns around accidents and waste management remain a challenge for this sector, both operationally and optically, these risks are declining. Nuclear power plants have been operating for approximately 60 years across 36 countries, resulting in over 18,500 cumulative reactor years around the globe, with very few safety incidents. This does not mean that oversight, innovation and risk management should be ignored, but rather underscores the improvements that have been made in recent decades. 

As the nuclear energy industry evolves, there are potential implications and opportunities for companies across several sectors, including utilities, materials and industrials. Mining enrichment and delivery of uranium will be critical services as demand increases, with additional opportunities around infrastructure build out, power plant construction and waste management. 

We believe Canada is in a unique position to benefit from these trends. As the second biggest producer of uranium globally, higher demand for nuclear energy domestically and internationally should benefit local communities by creating jobs, contributing to GDP growth, accelerating emissions reductions and bolstering domestic energy security. 

The second area of opportunity we’re seeing for investors is around the emergence of the Indigenous economy in Canada. New government policy support — including loan guarantee programs to unlock equity participation in major projects — will spur incredible contributions from Indigenous communities to the Canadian economy. Nation-building infrastructure projects and the unlocking of Canada’s critical mineral deposits will go through Indigenous lands and communities. 

This will mean that governments and companies will need to actively bring Indigenous communities to the table, and support participation in the economic benefits of these projects. Now more than ever, we as Canadians will need to reaffirm our commitment to the United Nations Declaration for the Rights of Indigenous People, and ensure that project approvals appropriately incorporate free and prior informed consent. 

And finally, possibly the most exciting development for investors related to the energy transition is the growth and maturity of the carbon management industry. 

First, it’s important to understand the difference between compliance and voluntary markets. Historically, investors have thought of carbon markets as, effectively, the compliance markets, which are cap and trade systems across the developed world that set emissions caps on industry, and create a trading volume of credits for those that overproduce their allotment or underproduce their allotment. And there have been the development of derivatives markets to trade in these futures contracts around some of these credits. 

But what we’re really talking about here is the growth in the voluntary markets. And the voluntary markets have had a poor representation for their contribution to the climate transition as a result of the dominance of avoidance credits, which are essentially preserving existing land or forests, as an example, to produce a credit that has low cost and has no additionality. 

But what we’re talking about here is the emergence and growth of the carbon dioxide removal market. And this industry will need to scale to as much as 10 gigatons per year of production to meet various net-zero scenarios, meaning that this will become one of the largest commodity markets by volume in the world by 2050, and beyond. 

The market is saturated across various degrees of approaches, including nature-based solutions, which range from projects like afforestation through to biochar (burning of organic material in low-oxygenated environments), through to enhanced rock weathering, which accelerates a natural process to store carbon in soil, all the way out to novel and technology-based solutions that you may think of when you think of the CDR market, which are large fans pulling air in and condensing CO2 to be stored at a storage facility. 

These projects are all maturing, and all starting to pass first-of-a-kind and demonstration projects. 

And alongside that, we now have major buyers who are active in the market, entering off-take agreements with these developers. These buyers are the likes of Microsoft, the frontier conglomeration, which includes members like Stripe and Shopify. And these actors are creating the financial incentive for investors to come into the market to finance these projects. 

We believe that this market has now reached the maturity where it’s ready for investors to scale, and we believe that debt will be an essential component of this, and we are seeing some very exciting opportunities around the CDR market. 

* * * 

There is debate in the industry today as to how emerging markets will contribute to the climate transition, given that developed market economies have benefited in the growth and prosperity associated with utilizing fossil fuels as a core part of the energy mix to drive growth throughout the industrial revolution, and the information age. It is now being asked of emerging market economies to take a different approach, and one that may be more costly and less effective in terms of real, immediate growth. 

And so throughout the COP process, there has been significant amount of debate in terms of how the global south will participate in the global transition; how they will ultimately be responsible for the costs of managing the physical risks that materialize as a result of the climate crisis; and lastly, how developed economies will support the emerging markets in terms of the energy transition and building a low-carbon economy that facilitates the same degree of growth opportunities that were presented for developed markets. 

This is an extremely complex issue, and one that is sure to be at the top of the discussion point at COP30 in Brazil. We may see some resolution as it relates to transfer payments. We may see some resolution as it relates to how developed economies will support emerging markets in their development of a low-carbon energy system. But this is definitely something that we, as investors, need to monitor as it will be a critical component of whether or not we can achieve our net-zero ambitions because we need to bring the entire world together within this process.

**

This program is intended for Advisor Use Only. The views expressed in this material are the views of CIBC Asset Management Inc., as of the date of publication unless otherwise indicated, and are subject to change at any time. CIBC Asset Management Inc. does not undertake any obligation or responsibility to update such opinions. This material is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice, it should not be relied upon in that regard or be considered predictive of any future market performance, nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this material should consult with their advisor. Forward-looking statements include statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “estimates”, or other similar wording. In addition, any statements that may be made concerning future performance, strategies, or prospects and possible future actions taken by the fund, are also forward-looking statements. Forward-looking statements are not guarantees of future performance. These statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results and achievements of the fund to differ materially from those expressed or implied by such statements. Such factors include, but are not limited to: general economic, market, and business conditions; fluctuations in securities prices, interest rates, and foreign currency exchange rates; changes in government regulations; and catastrophic events. The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. CIBC Asset Management Inc. does not undertake, and specifically disclaims, any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments, or otherwise prior to the release of the next management report of fund performance. Past performance may not be repeated and is not indicative of future results. The material and/or its contents may not be reproduced without the express written consent of CIBC Asset Management Inc. ^® The CIBC logo and “CIBC Asset Management” are registered trademarks of CIBC, used under license.

A changing regulatory environment for climate and ESG policies is the biggest factor impacting the sustainable investing landscape today, according to Aaron White, executive director, head of sustainable investments at CIBC Asset Management.

“Some companies and market participants, like asset managers and pension plans, are pulling back from their net-zero pledges and their affiliations,” he said in a June 4 interview. “This is largely due to the lack of clarity around the regulatory frameworks, and uncertainty in how they may be held accountable for ambitious targets that they might not meet.”

As a result, investors must evaluate how companies and participants are reacting to the material impacts to their businessess and portfolios, he noted.

Listen to the full conversation on the Advisor To Go podcast, powered by CIBC Asset Management.

There are also concerns around whether or not policy support for the transition to a low-carbon economy will remain strong, said White.    

“For businesses, this uncertainty makes long-term planning incredibly challenging,” he said. “And for investors, [it] creates greater uncertainty around the realities of transition risk in portfolios.”  

Further, there are questions surrounding the impact of diversity, equity and inclusion (DEI) initiatives in the U.S., he added. “Organizations are pivoting to measuring how DEI initiatives deliver positive financial outcomes, and ensuring that these efforts are creative to business and investment success.”

The industry is also looking towards November’s United Nations Climate Change Conference, COP30, where leaders will gather to discuss global climate goals.

“[The industry is] waiting to see whether COP30 will bring ambitious new targets, or whether we’ll see reduced ambition in the face of political and economic pressures,” White said.

The outcome of these factors will shape the sustainable investing landscape going forward, he said, whether it’s more disclosure on policies, strengthened DEI initiatives, or bolder climate targets.

Opportunities

Despite ongoing uncertainty, there are still opportunities in sustainable investing, White noted.

Growth in nuclear energy is one area to consider, with project capacity expected to double by 2050, he said. And nuclear energy is now included in Canada’s Green Bond Framework.

“While concerns around accidents and waste management remain a challenge for this sector, both operationally and optically, these risks are declining,” he said, adding that following 60 years of operation, nuclear power plants have had “very few safety incidents.”

White suggested looking to utilities, materials and industrials within nuclear energy, including mining and uranium as demand increases.

There has also been new policy support from governments for infrastructure projects in Indigenous communities, he noted, which will provide opportunities for investors.

“Governments and companies will need to actively bring Indigenous communities to the table, and support participation in the economic benefits of these projects,” he said.

The carbon dioxide removal (CDR) market also provides opportunities. The industry is expected to scale 10 gigatons of production per year, he said, making it one of the largest commodity producers by 2050.

Investors can look to companies in afforestation, biochar, rock weathering and technology-based solutions, White suggested, adding that Microsoft, Stripe and Shopify are all active in the CDR market.

“This market has now reached the maturity where it’s ready for investors to scale, and we believe that debt will be an essential component of this,” he said.

Investors should also monitor how emerging markets manage costs associated to the physical risks related to climate change, he added, and how developed economies support the south in the transition to a low-carbon economy.

“It will be a critical component of whether or not we can achieve our net-zero ambitions because we need to bring the entire world together within this process,” he said.

This article is part of the Advisor To Go program, sponsored by CIBC Asset Management. The article was written without input from the sponsor.

Text transcript

Welcome to Advisor to Go, brought to you by CIBC Asset Management, a podcast bringing advisors the latest financial insights and developments from our subject-matter experts themselves. 

* * * 

Robertson Velez, portfolio manager, CIBC Asset Management 

* * * 

Let me talk about the current economic environment in light of the tariffs, and its impact on the tech sector. In my view, the challenging environment we have seen over the past few months was due to the uncertainty, particularly about significant policy changes in the U.S. and the impact that they have on the economy. 

Over the past few months, we have seen the administration put on huge tariffs — as much as 145% on China — then reduced and deferred them significantly. And at this point, we are not even sure if the tariffs can be implemented as they are now. So the main point is that the concerns are about the uncertainty rather than the technology thesis. So it’s important to look through what’s happening and filter out the signal from the noise. 

It has been the goal of the past two U.S. administrations to bring manufacturing in key technologies back to the U.S. The only difference is in the approach.  

The Biden administration used the carrot. For example: using a massive subsidy program like the CHIPS Act to bring back semiconductor manufacturing, which would have had to be paid for with taxes or inflation. 

The Trump administration is using the stick through tariffs on foreign imported goods, which is effectively a tax to incentivize specific capital allocation. The end goal is the same, which is to bring manufacturing back to the U.S. 

If we look past the noise at what this would mean to the U.S. technology landscape in a few years, technology such as AI becomes even more critical, not less, because of the need to improve productivity in the U.S. to remain competitive in global markets. 

* * * 

There are always many factors impacting the tech sector. So let’s talk about some of the existential threats beyond tariffs. There is a current belief in the U.S. administration that they can control the competitive landscape for technologies like AI through export controls of key technologies. So many export control restrictions have been put on U.S. companies and their allies, restricting them from selling key technologies to China. 

Beyond the short-term view of lost sales, I think there is a bigger risk that China will develop these capabilities on their own, without relying on American platforms, making them a bigger competitive threat longer term. Necessity is the mother of invention, after all, and China has demonstrated significant capacity for AI innovation, even in the face of significant export controls implemented so far. 

Longer term, the biggest risk to the tech sector is disruption itself. By its very nature, tech tends to separate winners and losers through the creative destruction process over time, and it is important to be on the right side of the technology adoption trends. The current theme in tech is AI, which is both the biggest potential opportunity and disruptor. 

I don’t think we talk enough about this because most people assume AI is good for everyone. But it is important to recognize which businesses will thrive with the adoption of this technology, and which will be disrupted by it. 

This isn’t as easy as it sounds, because practically every company claims to embrace AI, and investors assume that AI is just good for everyone. But without some kind of competitive advantage enabled by AI, this would just mean added costs for companies to stay relevant. 

Not all companies will be able to achieve competitive advantage through AI, and our job is to identify those with competitive advantages. 

* * * 

So, in terms of the AI revolution and what it means for investors, about 80% of the portfolio is invested in the AI theme. Let me talk through these three themes. 

We own the fundamental core of AI, such as semiconductors and infrastructure. There’s a view that having run up so much over the past two years, it would be difficult for these companies to continue to grow, especially in the face of advancements in the cost efficiency of AI algorithms. Our view is that as the costs of implementing AI come down, the demand for AI actually goes up, not down. And this is supported by the continued growth in CapEx guidance of the major hyperscalers, like Alphabet, Meta and Microsoft. So examples of companies in this theme are Nvidia, which remains the core AI infrastructure play, and Broadcom, which benefits from AI-related connectivity solutions, as well as custom chips for AI. 

Secondly, we invest in enterprise software and tools where AI applications are used. The challenge with enterprise in using AI is not just AI itself, but in migrating its large stores of data to a form that is useful for AI training. We believe that the market for data migration tools will be as big as the AI market itself. So we invest in companies that have access to enterprise data that can use AI to significantly improve productivity. 

For example, Microsoft Copilot can access enterprise data to augment its Office suite. ServiceNow uses AI to incorporate data to enhance workflows. And Salesforce uses enterprise data to implement agentic AI to replace human functions. 

Third, we invest in direct applications of AI to the consumer. This could take many forms, such as AI enhanced search engines, better enhanced recommendation engines or analytics, or new consumer-facing applications. 

For example, Google and Meta uses AI in all its consumer-facing products to improve monetization. Apple uses AI to augment its smartphone products. 

So these are some of the opportunities ahead, and I believe we’re still at early stages of this AI adoption curve. 

* * * 

So what challenges remain? 

The biggest challenge in any adoption of new technologies is acceptance. Most industries are very resistant to change, and the tech landscape is littered with products that fail to get consumers and businesses to change behavioural patterns. 

For example, virtual reality largely failed in the past to achieve mass adoption because people didn’t want to wear a bulky headgear for their entertainment. And many businesses still run on mainframe today because of the difficulty in getting large institutions to transition out of old systems. 

AI has an advantage in that it adapts well to human behaviour, and it has gained traction in many applications that are an easy replacement for human functions, such as in contact centers and in coding. More complex tasks, however, are more difficult to penetrate due largely to issues of trust. 

As AI is proven out in various fields of endeavour, however, such as in robotaxis or in humanoid robots, I think we will soon see an inflection point in AI adoption. And I think that this is a huge opportunity over the next decade, of which we are still at early stages, probably the first two or three years of this AI adoption curve. And over the next decade, this will be the biggest opportunity in technology. 

* * * 

So, what is my outlook for the tech sector? 

My outlook over the medium and long term has been positive all year. Even ahead of the U.S. Liberation Day announcement, I had said I was cautiously optimistic on tech, ahead of what we knew would be very disruptive trade policies. 

I’ll give you some context for my optimism. The technology sector is driven by cycles. We can look back at massive tech cycles in the past, like smartphones and PCs, and we generally see a period of about a decade when we see massive growth as the technology is adopted. We are about two years into the current technology adoption cycle of AI. We have seen massive spending by the large hyperscaler companies in AI infrastructure, which I expect will translate into adoption in enterprise and consumer applications. And we are still at very early stages in the proliferation of AI. 

So, let me talk about the current environment. We have seen a lot of challenges over the past several months due to uncertainty about U.S. trade policies. But looking past the noise, we believe that AI remains the most important technology to invest in over the next decade because of its potential to massively change the way we work to improve productivity. And I think that we are still very early in that cycle, and the opportunities are still ahead of us.

**

This program is intended for Advisor Use Only. The views expressed in this material are the views of CIBC Asset Management Inc., as of the date of publication unless otherwise indicated, and are subject to change at any time. CIBC Asset Management Inc. does not undertake any obligation or responsibility to update such opinions. This material is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice, it should not be relied upon in that regard or be considered predictive of any future market performance, nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this material should consult with their advisor. Forward-looking statements include statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “estimates”, or other similar wording. In addition, any statements that may be made concerning future performance, strategies, or prospects and possible future actions taken by the fund, are also forward-looking statements. Forward-looking statements are not guarantees of future performance. These statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results and achievements of the fund to differ materially from those expressed or implied by such statements. Such factors include, but are not limited to: general economic, market, and business conditions; fluctuations in securities prices, interest rates, and foreign currency exchange rates; changes in government regulations; and catastrophic events. The above list of important factors that may affect future results is not exhaustive. Before making any investment decisions, we encourage you to consider these and other factors carefully. CIBC Asset Management Inc. does not undertake, and specifically disclaims, any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments, or otherwise prior to the release of the next management report of fund performance. Past performance may not be repeated and is not indicative of future results. The material and/or its contents may not be reproduced without the express written consent of CIBC Asset Management Inc. ^® The CIBC logo and “CIBC Asset Management” are registered trademarks of CIBC, used under license.

Analyzing which companies will benefit from AI solutions and how easily those solutions can be integrated into the company’s workflow will be key to finding winners in the AI revolution, says Robertson Velez, portfolio manager, Global Technology Fund at CIBC Asset Management.

Valez said AI will cut both ways, offering productivity leaps to some companies and crippling costs to others.

“Most people assume AI is good for everyone,” he said in a May 29 interview. “But it is important to recognize which businesses will thrive with the adoption of this technology, and which will be disrupted by it.”

In order to find winners of the AI revolution, look to companies that will gain a competitive advantage, otherwise “this would just mean added costs for companies to stay relevant,” he said.

Listen to the full conversation on the Advisor To Go podcast, powered by CIBC Asset Management.

Velez outlined three areas that could provide opportunities for investors.

1. Semiconductors and infrastructure

Some may think that it will be difficult for semiconductor and infrastructure companies to grow, having peaked after a two-year run, Velez noted.

“Our view is that as the cost of implementing AI come down, the demand for AI actually goes up, not down. And this is supported by the continued growth in capex guidance of the major hyperscalers, like Alphabet, Meta and Microsoft.”

Velez likes Nvidia, a core AI infrastructure play, as well as Broadcom, which benefits from AI-related connectivity solutions and custom chips.

2. Enterprise software and tools

A challenge in enterprise software and tools where AI is used is migrating volumes of data into a form that is useful for AI training, Velez said. Still, he expects the market for data migration tools will grow to “be as big as the AI market itself.”

The key is to find companies that can use these tools to improve productivity, he noted. Velez likes Microsoft Copilot, which can access enterprise data to improve its Office suite of programs. He also likes ServiceNow, which uses AI to incorporate data to boost workflows, as well as Salesforce, which uses enterprise data to implement agentic AI to replace human functions.

3. Consumer applications

Direct applications of AI to the consumer can take several forms, he noted, including enhanced search engines, analytics or consumer-facing applications.

“For example, Google and Meta use AI in all its consumer-facing products to improve monetization. Apple uses AI to augment its smartphone products,” he said. “So these are some of the opportunities ahead.”

Ongoing challenges

Velez said acceptance of new AI technologies will be the main challenge going forward, as many industries are resistant to change.

“As AI is proven out in various fields of endeavour, however, such as in robotaxis or in humanoid robots, I think we will soon see an inflection point in AI adoption,” he said.

There is also continued uncertainty over U.S. trade policies and export control restrictions on U.S. companies and their allies, which restrict them from selling technologies to China, noted Velez.

Beyond losing sales in the short term, “there is a bigger risk that China will develop these capabilities on their own without relying on American platforms, making them a bigger competitive threat longer term,” he said.

“Looking past the noise, we believe that AI remains the most important technology to invest in over the next decade because of its potential to massively change the way we work to improve productivity,” Velez added.

This article is part of the Advisor To Go program, sponsored by CIBC Asset Management. The article was written without input from the sponsor.