Global Equity Fund Performance in the AI-Driven Market: Evaluating Value-Oriented Strategies Amid Growth-Sector Dominance

The AI-driven market of 2023–2025 has reshaped global equity fund dynamics, with growth-sector strategies-particularly those focused on artificial intelligence (AI)-dominating headlines and returns. However, as valuations stretch and macroeconomic uncertainties persist, value-oriented strategies are re-emerging as compelling alternatives. This analysis evaluates the performance, risks, and sector allocations of value and growth equity funds in the AI era, drawing on recent data and institutional insights.

The Growth Premium and Its Limits

AI has catalyzed a surge in venture capital and growth equity investments, reaching $209 billion in 2025. This influx has disproportionately benefited large-cap technology stocks, with the so-called "Magnificent 7" companies driving much of the market's gains. According to JPMorgan's report, growth-sector funds have capitalized on this momentum, with AI-related innovations accounting for a significant portion of their returns.

Yet, the exuberance surrounding AI has raised red flags. BlackRock warns that speculative behavior and elevated valuations in growth stocks could mirror past bubbles, despite the sector's "resilient foundation" in terms of profitability and capital allocation. Vanguard's 2025 outlook echoes this caution, noting that while U.S. tech stocks may retain short-term momentum, their long-term risk-return profiles appear less attractive compared to value equities.

This divergence underscores a critical question: Can growth-sector dominance sustain itself amid rising macroeconomic headwinds?

Value Sectors Gain Ground

Value-oriented funds have increasingly emphasized sectors like energy, healthcare, and financials, which offer defensive characteristics and stable cash flows. According to JPMorgan's analysis, these sectors have historically outperformed during periods of rising interest rates and economic volatility-conditions that remain relevant in 2025. For instance, energy stocks have benefited from sustained demand for fossil fuels and geopolitical tensions, while financials have thrived on tighter monetary policy and higher lending margins.

This strategic shift toward value sectors aligns with Vanguard's assertion that value stocks are better positioned to deliver consistent returns over the next five to ten years. The firm attributes this to value equities' stronger balance sheets and earnings visibility, which contrast with the speculative narratives driving growth stocks.

Sector Allocation Divergence

The sector allocation strategies of value and growth funds reflect their contrasting philosophies. Growth funds remain heavily concentrated in technology, with the Magnificent 7 accounting for over 30% of the S&P 500's market capitalization. While this concentration has fueled outsized returns, it has also exposed portfolios to overconcentration risk. BlackRock notes that a significant portion of the investment community has adopted a "neutral or negative" stance on AI as a broad theme, citing concerns about stretched valuations.

Conversely, value funds have diversified their exposures across cyclical and defensive sectors. Adams Street Partners' 2025 Global Investor Survey reveals that private equity and growth equity allocations are gaining traction, particularly in AI-driven innovation. This suggests that value-oriented managers are not entirely eschewing AI but are instead seeking opportunities in undervalued segments of the technology ecosystem.

Risks and Opportunities in the AI Era

The AI boom has introduced unique risks for both strategies. Growth funds face the challenge of justifying valuations for companies with unproven business models, while value funds must navigate the risk of underperforming in a market skewed toward high-growth narratives. McKinsey's 2025 Global Private Markets Report highlights the resilience of private equity amid macroeconomic uncertainties, suggesting that long-term value creation remains viable even in volatile environments.

However, the interplay between public and private markets complicates the landscape. As AI-driven startups mature, they may transition from private equity portfolios to public markets, blurring the lines between value and growth strategies. This dynamic could create new opportunities for investors willing to bridge the gap between traditional value sectors and emerging technologies.

Conclusion

The AI-driven market of 2025 presents a paradox: growth-sector dominance coexists with a re-emerging case for value-oriented strategies. While growth funds have capitalized on the AI boom, their concentration risks and valuation challenges cannot be ignored. Value funds, by contrast, offer a more balanced approach, leveraging defensive sectors and disciplined capital allocation to navigate macroeconomic headwinds. As the market evolves, a hybrid strategy that integrates the strengths of both paradigms may prove most effective.