PIMCO's Flagship 60/40 Fund Rotates AI Exposure Toward Asian Supply Chains and Critical Materials

Emmanuel Sharef, portfolio manager of PIMCO's $19 billion Balanced Income and Growth Fund, outlined in a Bloomberg interview a strategic pivot away from crowded U.S. mega-cap tech stocks toward Asian companies further down the AI supply chain. The fund, which has outperformed 97% of peers over the past three years, maintains a 60/40 equity-bond allocation but has become underweight most hyperscalers and members of the Magnificent Seven due to elevated valuations, rising debt from AI capital expenditures, and pressure on free cash flow.

Instead, the strategy emphasizes exposure to semiconductor components, cooling systems, interconnects, optical equipment, power supplies, construction machinery, and industrial metals required for data center buildouts. Specific holdings include Samsung Electronics, SK Hynix, and Taiwan Semiconductor Manufacturing (TSMC), reflecting overweight positioning in Asia where earnings growth remains robust and valuations more attractive. Sharef highlighted that capturing the AI theme does not require owning the most expensive stocks, noting the enormous scale of AI capex implies sustained demand across the physical infrastructure layer.

The fund also tilts toward Chinese resource and materials companies for their role in both data center construction and rare earth supply chains, a view reinforced amid ongoing export controls and global efforts to diversify critical mineral sourcing. This approach aligns with broader market observations of supply chain concentration in Asia for AI-enabling components, including memory chips and specialty materials, where bottlenecks are shifting value downstream from U.S. hyperscalers.

Related reporting confirms PIMCO's overweight stance on Asia persists as long as regional earnings momentum holds, with additional bullish views on biotech and life sciences. The rotation exemplifies how AI-driven investment trends are evolving beyond initial GPU and hyperscaler winners toward the foundational inputs and Asian intermediaries that enable the buildout.