SINGAPORE — An unwinding of artificial intelligence trade poses the biggest risk to the market, according to Singapore’s state-owned investment giant Temasek.
“I don’t think it’s imminent, but will there be a boom in 2027? Yeah, probably,” Temasek chief investment officer Rohit Sipahimalani said at the Milken Institute Asia Summit in Singapore.
Sipahimalani said AI is one of the key forces keeping U.S. stocks near all-time highs, even as U.S. bond yields soar, pointing to the profitability of major technology companies.
He said that despite higher borrowing costs, the S&P 500 remains near record levels, supported by “earnings momentum led by AI and major companies.”
However, strength at the index level masks weakness below the surface. Sipahimalani noted that about half of the Russell 3000 stocks are at least 20% below their June highs, underscoring the extent to which the market’s resilience relies on a small group of winners.
He said a reversal in AI trading could be driven by several factors, including safety concerns leading to increased regulation and signs that customers are not generating enough returns from their technology spending.
However, Temasek remains bullish on AI in the long term and continues to increase its investments in the sector. About half of the company’s AI exposure is currently in publicly traded assets, and ideally that proportion would increase to about 70% to 75%, Sipahimalani said.
Temasek would then be better able to adjust its investments as the industry evolves, compared to private assets that are difficult to exit quickly.
“One of the things we recognize is that AI is a very rapidly changing environment, so things can change easily and we have to be able to pivot,” he said.
Temasek has invested in private AI model developers such as OpenAI and Anthropic, but “the size of the exposure there will be different compared to other areas where there is more flexibility,” Sipahimalani said.
