BHP could continue to outperform Australia’s major banks as investors increasingly favour companies exposed to artificial intelligence infrastructure and global growth themes, according to Global X ETFs.
Justin Lin, investment strategist at Global X, said the outlook for the banking sector had become more challenging as economic growth slowed and conditions in the housing market softened.
Banks are facing pressure from weaker economic activity, cooling property markets and uncertainty among domestic investors, including around capital gains tax reform, Lin said.
He pointed to falling auction clearance rates across Queensland and New South Wales as an early indicator that mortgage demand may begin to weaken.
The comments come as investors reassess the strong premium attached to Commonwealth Bank, which has benefited from sustained domestic capital inflows and its position as a market favourite.
“While CBA has benefited from years of strong domestic capital flows and a premium valuation, investors are beginning to question some of the assumptions underpinning that premium. Concerns around slower loan growth are increasing as the domestic economy and property market cools.”
By contrast, Lin said BHP was benefiting from several structural themes, including rising demand for commodities required to support the expansion of AI infrastructure.
“BHP, by contrast, is more leveraged to global growth, AI infrastructure and the structural demand for raw materials.”
He said copper had become one of the clearest links between the mining giant and the AI boom, accounting for around 40 per cent of company revenue.
“BHP is increasingly exposed to the AI infrastructure buildout through the raw materials required for electrification, data centres and grid expansion. Copper is the clearest link and now forms around 40 per cent of the company’s revenue.”
The rapid growth of AI-related electricity demand was creating a significant need for transmission networks, substations, cooling systems and broader energy infrastructure, supporting long-term demand for industrial commodities.
“As AI power demand accelerates, the need for transmission, substations, cooling systems and energy infrastructure rises with it. BHP’s scale in copper and broader exposure to industrial commodities means local investors could potentially view it as an indirect AI infrastructure beneficiary.”
Given those tailwinds, Lin said BHP’s recent market leadership may not be over.
“The outlook for Australian banks looks more challenged relative to BHP and we believe BHP’s leadership could certainly continue from here.”
The strategist also argued that the AI investment boom was exposing a structural weakness in the Australian sharemarket, where investors have limited access to major AI companies.
“Meanwhile, the lack of major AI companies on the ASX is becoming increasingly significant from a growth and performance perspective. Australian investors are watching US and Asian AI names rally to new highs, while the local market remains heavily weighted toward defensive and cyclical sectors.”
“AI and AI infrastructure represent one of the strongest earnings growth themes globally, yet investors have limited opportunities to gain direct exposure through the domestic market.”
As a result, Australian investors seeking exposure to AI-driven growth may increasingly allocate capital overseas, particularly while domestic equities contend with higher interest rates, slower growth and ongoing tax uncertainty.
“As such, local investors seeking AI growth may increasingly look offshore, particularly while domestic equities are weighed down by higher rates and slower growth, as well as tax uncertainty.”
