T. Rowe Price: Which AI Stocks Have Growth Built to Last?

Not every AI stock riding this year’s rally has growth that will last, according to T. Rowe Price portfolio manager Paul Greene. He argues that investors need to weigh how long a company’s advantage will last, not just how big it looks today.Key Takeaways: TCHP has returned 12.49% annualized since its 2020 launch. Nvidia is TCHP’s largest holding, at 17.4%, reflecting Greene’s semiconductor conviction. Payment networks and aerospace makers offer growth potential entirely outside of the AI trade. Hardware makers that rode supply shortages to steep price increases illustrate the gap between magnitude and durability, Greene wrote in a recent report. “Aggressive price increases based primarily on scarcity historically have proved less defensible,” he said, adding that elevated prices tend to draw in new competitors and push customers toward workarounds. That same durability lens runs through the portfolio Greene manages day to day. The T. Rowe Price Blue Chip Growth ETF (TCHP B-) screens for established, large companies with above-average growth and profitability. The approach leans on bottom-up research rather than momentum, according to the fund’s fact sheet. See more: T. Rowe Price Eyes AI ‘Sleepers’ Beyond Chip Stocks TCHP held $2.1 billion in net assets as of Sept. 11, and charges a 0.57% expense ratio, according to T. Rowe Price data. Shares have returned 12.5% since the fund launched in August 2020. Greene, who has spent 20 years at T. Rowe Price, builds a concentrated book of 75 to 125 large-cap names. He puts at least 80% of assets into blue-chip companies with above-average earnings potential, the fact sheet shows. The fund aims to beat the benchmark mainly through stock selection over a three- to five-year cycle.Where Durable Growth Shows UpWithin semiconductors, Greene favors companies with leadership in advanced manufacturing and foundry capacity. He calls them “linchpin” firms that benefit no matter which chip architecture wins out. Hyperscalers including Alphabet Inc. (GOOGL), Amazon.com, Inc. (AMZN), Meta Platforms, Inc. (META), Microsoft Corp. (MSFT) and Oracle Corp. (ORCL) fit a similar mold, he wrote. Their cloud units are layering in AI workflows that should prove sticky over time. Traditional software is the AI story Greene trusts least. Subscription-based vendors face pressure to shift toward usage-based pricing as competition intensifies and pricing power erodes, he explained. Caution and selectivity are warranted in that corner of the market. In Greene’s view, fears that AI shopping agents will gut e-commerce are overdone. He pointed to Alphabet’s decades-long attempt to compete with online travel agencies. That rivalry ended with the search giant routing traffic to those same agencies instead of displacing them. The result: real-world relationships and integrated payments proved harder to disrupt than software alone. Outside AI entirely, Greene pointed to global payment networks and aerospace manufacturers as areas where earnings can climb for years. Both benefit from pricing power and the shift from cash to digital transactions. Those preferences show up directly in TCHP’s holdings. Nvidia Corp. (NVDA) is the fund’s largest position at 17.4%, according to ETF Database. Alphabet, combining its two share classes, ranks second at roughly 11.4% of the fund. Microsoft and Broadcom Inc. (AVGO) follow, at 5.8% and 5.7%, respectively. Hyperscaler spending offers a sense of scale. Combined capital expenditures from Alphabet, Amazon.com, Meta Platforms, Microsoft and Oracle have climbed every year since 2017. Consensus estimates compiled by T. Rowe Price using FactSet data project that spending will keep rising through 2027. Free cash flow, meanwhile, is expected to shrink. For more news, information, and analysis, visit our Active ETF Content Hub.