A top-performing fund manager at PIMCO is betting that the next wave of winners from the artificial intelligence boom won't be found among crowded US mega-cap tech stocks, instead turning to Asian equipment suppliers, Chinese financials, and healthcare names.

Emmanuel Sharef, who runs PIMCO's flagship 60/40 balanced Income & Growth fund, said that as AI-related spending surges, many large US tech firms are carrying heavier debt loads and facing murkier earnings outlooks, making them less attractive. Data shows the fund, with nearly $19 billion in assets under management, has outperformed 97% of its peers over the past three years.

"We are currently underweight most hyperscale data center operators, and we are also underweight most of the Magnificent Seven stocks, mainly because their valuations are too high," Sharef said earlier this week in Singapore. "You don't necessarily need to hold the most expensive stocks to capture a theme or a market trend."

Sharef said PIMCO remains overweight Asia, citing strong earnings growth and exposure to downstream players in the AI supply chain. He expects that stance to persist as long as earnings momentum stays robust.

"The scale of capital expenditure in AI is enormous," he said. "That implies a huge surge in demand for semiconductor components, cooling equipment, cable interconnects, optical devices, power supplies, construction machinery, metals, and all the materials needed to build data centers."

The fund is also bullish on biotechnology and life sciences, an area PIMCO has been steadily increasing exposure to over the past 18 months or so.

"Part of the earnings estimate revisions reflect increased M&A activity in the sector, as large biotech firms have been working to diversify their drug pipelines," Sharef said. "Given the developments in AI, applying this technology could potentially cure more types of diseases."