As the United States celebrates 250 years of independence, it's a reminder that America’s economic success has never been driven by just a handful of companies.
Today's market tells a different story. The rise of the Magnificent Seven has led many investors to equate the US with a small group of global technology giants. While their importance is undeniable, they represent only one part of a much broader economy.
Beneath the headlines, thousands of smaller, domestically focused businesses are building factories, modernising infrastructure, supporting AI, strengthening supply chains and solving increasingly specialist challenges.
They may not attract the same attention as Silicon Valley's biggest names, but collectively, they represent what we think of as the heart of America: the businesses quietly underpinning the country's long-term economic strength.
As managers of JPMorgan US Smaller Companies investment trust, this is where we spend our time looking for opportunities. Investing predominantly in domestically focused businesses gives us a different perspective on the US economy. This ecosystem extends well beyond the largest technology stocks and focuses instead on companies enabling America's next phase of growth.
But rather than trying to predict tomorrow's household names, we're interested in identifying high-quality businesses with durable competitive advantages that benefit from long-term structural trends. Three themes stand out today.
Building the infrastructure behind AI
Artificial intelligence has understandably captured investors' attention but much of the conversation remains focused on hyperscale technology companies and semiconductor designers and manufacturers.
In reality, every dollar invested in AI requires an enormous amount of physical infrastructure. Data centres require cooling systems, electrical equipment, engineering expertise and ongoing maintenance before a single AI model can be trained.
One company benefiting from this trend is Modine Manufacturing. Founded in 1916, Modine specialises in highly engineered thermal management solutions. As computing power becomes more concentrated and energy-intensive efficient cooling has become essential infrastructure rather than an operational afterthought.
What makes Modine particularly interesting is that it doesn’t compete in the crowded areas of AI that dominate headlines. Instead, it occupies a critical position further down the value chain.
Its products are embedded within facilities, difficult to replace and central to maintaining continuous operations. This allows the company to participate in AI-driven growth while retaining the characteristics we value most: profitability, durability and competitive differentiation.
Engineering America's next industrial chapter
Another defining feature of America's next chapter is the resurgence of domestic investment. Whether driven by reshoring, manufacturing expansion or rising electricity demand, businesses across the US are investing heavily in new facilities and modern infrastructure.
But behind every new factory, distribution centre or data centre is a network of specialist engineering businesses responsible for designing, installing and maintaining the infrastructure supporting that growth.
One example is Legence, which provides engineering, consulting, installation and maintenance services across commercial building and critical infrastructure. While rarely making headlines, businesses like Legence are helping turn long-term investment themes into reality.
They illustrate an important characteristic of the US smaller company universe: many of the country's most important businesses operate quietly behind the scenes, providing specialised expertise that becomes increasingly valuable as investment accelerates.
Specialist expertise remains a competitive advantage
Innovation doesn't always mean inventing new technologies. Sometimes it means solving increasingly complex problems more effectively than competitors.
Ryan Specialty operated in the excess and surplus insurance market, helping businesses insure risks that standard insurance products cannot easily cover. As industries become more specialised and risks more complex, demand for expert underwriting and distribution continues to grow.
Although investor sentiment has been affected by concerns around pricing cycles and the potential impact of AI on insurance distribution, we continue to see a high-quality business whose competitive advantage rests on specialist expertise, strong relationships and deep market knowledge.
Businesses like Ryan Specialty demonstrate another important feature of the US economy: businesses don't need to be household names to build enduring competitive positions. Often, solving niche problems exceptionally well creates stronger competitive moats than operating in crowded mainstream markets.
Keep looking beyond the big names
America's next phase of economic success is unlikely to be driven by a single industry or a handful of tech giants. Instead, we believe it will be built by thousands of businesses investing in critical infrastructure, supporting industry and providing specialist expertise across the domestic economy.
These are companies that rarely dominate the headlines but collectively form much of the backbone of the American economy.
For long-term investors, looking beyond the obvious can uncover opportunities that are easy to overlook when attention is concentrated on the market's largest companies. As the US enters its next chapter, we believe many of the country's most compelling investment opportunities remain at the heart of its economy -not necessarily at the top of its stock market.
Jon Brachle is portfolio manager of JPMorgan US Smaller Companies investment trust. The views expressed above should not be taken as investment advice.