By any measure, 2025 has belonged to artificial intelligence. A narrow group of quality growth stocks and AI beneficiaries has dominated global equity markets, driving concentration to levels rarely seen outside the late-1990s tech boom. For investors who have happily ridden the AI tiger this year, the question now is awkwardly simple: do you cling on, or do you start edging towards the exit?
Valuations, of course, have risen. Whether AI constitutes a full-blown bubble is one of those questions that only looks obvious in hindsight. There are certainly familiar warning signs: crowded trades, heroic assumptions about future profits, and the unspoken belief that this time really is different.
Yet there is also a strong case that the story still has legs. Fear of corporate obsolescence could drive a further surge in AI capital expenditure in 2026; adoption is spreading beyond US tech giants into sectors like pharmaceuticals and financials; and investment is becoming more global, with India now talking seriously about mega-scale AI infrastructure.
Next year could be a stock picker’s market
The next phase of the trade, though, looks less like a rising tide and more like a stock-picker’s market. Acceleration, broadening and monetisation will create winners and losers rather than lifting all boats. That alone argues for less concentration and more discrimination, and that is where the UK’s much-maligned investment trust sector starts to look interesting again.
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After a torrid 2022–23, investment trusts have been quietly coming back to life. Corporate actions (mergers, buybacks, wind-ups) have helped restore confidence, while falling interest rates and a less generous cash ISA regime have nudged income-hungry savers back towards equities.
Many trusts still trade at discounts to net asset value, meaning investors can buy £1 of assets for significantly less. Those discounts have already begun to narrow in 2025, suggesting demand is stirring, but plenty remain.
Not all discounts are created equal. Growth capital trusts, often heavily exposed to unquoted companies, have enjoyed a sharp re-rating. Seraphim Space [LON:SSIT], for instance, has seen its discount shrink dramatically after a strong rebound, though concentration risk remains high. India-focused trusts such as JPMorgan India Growth & Income [LON:JIGI] and Aberdeen New India [LON:ANII] have also benefited from corporate activity, while emerging market trusts have ridden a China-led recovery. Utilico Emerging Markets Trust [LON:UEM] has seen its discount almost halve in a year.
Other corners of the market remain unloved
Renewable energy trusts have drifted wider on regulatory uncertainty, despite assets that still generate steady cash flows. Meanwhile, some trusts trade at eye-watering premiums, usually because they offer scarce exposure. JPMorgan Emerging Europe, Middle East & Africa [LON:JEMA] sits on a triple-digit premium thanks to speculative hope that Russian assets may one day be worth something. 3i [LON:3IN] trades above NAV because it provides the only listed access to Dutch retailer Action and enjoys passive FTSE 100 inflows.
Closer to home, UK-focused trusts have enjoyed a renaissance as the FTSE has surprised on the upside. Temple Bar [LON:TEMPL] has flipped from discount to premium; Merchants Trust [LON:MRCH] still offers a modest discount and a 5 per cent yield. The venerable City of London Investment Trust [LON:CTY], with its 59-year record of dividend growth, trades at a small premium that many investors seem happy to pay for reliability.
Investment trusts are not for everyone
Discounts can remain stubbornly wide; gearing amplifies both gains and losses; fees are higher than those of vanilla ETFs. But they offer something increasingly rare in an AI-obsessed world: diversification, patience and access to assets beyond the obvious winners. Their closed-ended structure allows managers to think long-term, to smooth dividends through revenue reserves, and to hold illiquid assets without being forced sellers at precisely the wrong moment.
After the AI gold rush of 2025, that kind of old-fashioned prudence may look less dull than it once did. For investors uneasy about ever-greater concentration in a handful of US tech stocks, the UK’s investment trust market, discounts, quirks and all, offers a timely reminder that there is more than one way to compound wealth.
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