Temasek Warns AI Trade Unwinding Could Pose Major Risk to Markets
Singapore's state-owned investment firm Temasek has warned that an unwinding of the artificial intelligence (AI) trade could pose one of the biggest risks to global markets. According to Rohit Sipahimalani, Temasek’s chief investment officer, while a reversal is not imminent, it may bring volatility by 2027. AI-driven earnings momentum has helped support U.S. stock indices like the S&P 500 despite rising Treasury yields. However, market resilience appears concentrated in a small group of high-performing stocks, with many Russell 3000 companies significantly below their June highs. Potential triggers for an unwinding include regulatory tightening due to safety concerns or underwhelming returns from AI investments by businesses. Despite these risks, Temasek remains optimistic about the long-term potential of AI and is increasing its exposure in publicly traded assets within the sector. The firm currently holds around half of its AI-related investments in public markets but aims to raise this share to 70–75% for greater flexibility as the industry evolves. This strategy allows Temasek to pivot quickly compared to private investments, which are harder to exit.
Topics: artificial intelligence investment strategy regulation stock markets