In this series, APG experts share their perspectives on key developments across sectors such as automotive, financials, and healthcare. In this edition, Frank Dekker (Expert Portfolio Manager, Analysis & Engagement) and Simone Andrews (Senior Responsible Investment Manager) delve into the tectonic shifts transforming the tech industry—and the role of long-term engagement in navigating them.
In a nutshell
- APG applies three key beliefs when investing in big tech equities: tectonic shifts, power dynamics in the value chain, and changes in the competitive environment.
- Dekker anticipates that quantum technology will be the next major technological shift around 2030, with a 'ChatGPT moment' for the mass market expected around 2035.
- One of the biggest challenges in engaging with big tech is information asymmetry.
APG—on behalf of its pension fund clients—invests with a long-term horizon. “Few players have the scale and expertise to truly commit to long-term investing,” says Dekker. “My colleagues and I have the privilege of dedicating substantial time to company meetings, sector research, and building investment cases. This depth of insight provides long-term context, helping us better assess risks and opportunities. Focus and context are the key ingredients for sound decision-making—and they make it easier to outperform the market.” To shape their long-term strategy in tech equities, Dekker and his colleagues in Amsterdam, New York, and Hong Kong collaborate closely.
Dekker adds that short-term outperformance is increasingly difficult due to competition from hedge funds and the unpredictability of near-term market movements. “Ironically, long-term forecasting is often easier than predicting short-term trends.”
Tectonic shifts
To guide their long-term strategy in tech equities, Dekker and his team rely on three foundational beliefs. The first is the concept of tectonic shifts. “Previous shifts include the evolution from mainframes to minicomputers, to PCs, to mobile, to cloud—and now to AI. When a fundamental change in computing occurs, everything changes. The stock value of the winner in such a shift can increase by a factor of 100 or even 1,000 over 10 to 15 years, while the broader market may grow by a factor of 10 to 15. Our challenge is to identify the next tectonic shift—and the companies that will emerge as winners. Easier said than done,” he notes.
Dekker believes quantum technology will be the next major shift, likely around 2030, with a 'ChatGPT moment' for the mass market expected around 2035. However, he also acknowledges that quantum may not materialize as expected. “Most quantum tech companies are still privately held. Google and IBM are active in the space, but it’s not yet generating meaningful revenue or forming a core part of their business. If we reach 100 logical qubits, that would signal a true tectonic shift—but realistically, that milestone may not be reached until the end of the decade. If it doesn’t happen, the current AI-driven shift will likely continue longer—unless another breakthrough emerges.”
Power dynamics in the value chain
The second belief focuses on power dynamics within the tech value chain. “In the current AI shift, GPUs are gaining prominence over CPUs. Companies that dominated previous shifts—like mobile and PC chipmakers—are now seeing slower growth, while AI (GPU) data centers are becoming increasingly vital. Meanwhile, chip design is growing more complex, energy consumption is rising, and cyber threats are becoming more sophisticated. A company that can address one or more of these challenges has the potential to gain significant influence in the value chain.”
Dekker highlights several investments aligned with this belief: “We invest in a company whose chips significantly reduce energy consumption in data centers. We also support EV suppliers that produce chips enabling faster charging, longer range, and enhanced autonomous driving. Additionally, we are overweight in cybersecurity firms, given the growing threat landscape driven by AI.”
Shifts in the competitive environment
The third belief centers on changes in the competitive landscape. “ASML is currently a monopolist in EUV machines,” Dekker explains. “Until recently, they had three major customers. Now, only TSMC remains active, as Samsung and Intel have temporarily halted orders. This alters the competitive environment—TSMC faces less pressure to purchase the latest EUV machines. We then assess whether and when Intel and Samsung will resume orders, which could reignite competition among the major chipmakers.”
Responsible AI and ESG Integration
Our clients and societal expectations for big tech companies have increased in recent years, requiring deeper analysis of sustainability and ESG factors within APG’s investment approach. We have traditionally focused on tech equities as large cap tech firms often rely more on equity financing due to high growth expectations and strong cash flows. However, higher capex intensity associated with AI may shift financing mix more towards debt. “We focus our engagement on what’s known as responsible AI,” says Andrews. “Many tech companies are only beginning to disclose how they perform on responsible AI in a decision-useful way. We’re still developing our own understanding, partly because the field is evolving so rapidly. Within five years, I expect a complete redefinition of responsible AI—alongside major developments in human rights like data privacy, environmental footprint, and job displacement. AI could have profound societal implications, and policymakers are still working to balance regulation with maintaining competitiveness and innovation.”
The challenge of information asymmetry
One of the biggest challenges for both governments and investors is information asymmetry, Andrews continues. “We don’t really know what AI companies are doing behind the scenes, especially as the development and deployment of AI is concentrated in a few players. We rely on their disclosures and internal assessments; however, we don’t have access to evaluate large language models and training data to evaluate the full impact of the models to end users. Are biases embedded in the data? We place a lot of trust in these companies, assuming they have internal checks and governance structures. But given their scale, even small errors can have massive consequences.”
Issues include the impact of social media on children, use of biometric data or the implications of e-commerce platforms offering healthcare information. Surveillance technology is also an increasing issue. These concerns require additional safeguards, which APG actively discusses with tech companies. “Policymakers will also play a major role, alongside investors, in pushing for accountability—especially in the supply chain,” Andrews notes. “There is more scrutiny on where things are made and under what conditions, especially in emerging markets. Hardware manufacturers and semiconductors face increasing scrutiny of their supply chain. And with initial shock from the tariffs, some companies have had to diversify to countries with weaker labor protections. We assess these risks from a long-term perspective, but it’s challenging. Supply chains are incredibly complex—often involving dozens of companies contributing to a single product. ”We assess these risks from a long-term perspective, but it’s challenging. Supply chains are incredibly complex—often involving dozens of companies contributing to a single product.”
Engagement in practice
Tech companies' reception to APG’s engagement efforts has been mixed so far, Andrews says. “We evaluate companies on their responsible AI policy, establishing clear accountability and oversight mechanisms, human rights impact assessment and maintaining transparency. We launched our engagement program in 2024 and are closely monitoring whether companies make progress to meet our client expectations set for 2030. Our broad exposure makes engagement more complex, but it helps when we clearly communicate that we’re active investors, willing to engage—and, if necessary, reduce exposure.”
Disclaimer
This material is for informational purposes only, is current as of the date noted and should not be used or taken as business, financial, tax, accounting, legal or other advice, or relied upon in substitution for the exercise of your independent judgment. For your specific situation or where otherwise required, expert advice should be sought. Although APG AM believes that the information contained above has been obtained from and is based upon sources APG AM believes to be reliable, APG AM does not guarantee its accuracy and it may be incomplete or condensed. APG AM makes no representation or warranties of any kind whatsoever in respect of such information. APG AM accepts no liability of any kind for loss arising from the use of the material presented in this publication. Past performance is not indicative of future results.
Any descriptions of ESG factors into investment processes does not guarantee positive impact or outcomes related to sustainability. While efforts are made to assess and manage risks stemming from environmental, social or governance events, there is no assurance that such risks are fully mitigated.