Big global investors see gold in AI but don’t buy the rush. At the recent Abu Dhabi Finance Week, several influential figures in the investment world voiced their concerns over the high valuations of AI-related companies. Despite the apprehension, they acknowledged the necessity of investing in the infrastructure vital to the long-term success of the sector.
Concerns About an AI Bubble
Technology giants including Alphabet, Meta, and Oracle have been rushing to debt markets in recent months to stay competitive in the race for AI dominance. This activity has sparked worries about a potential AI bubble. These apprehensions were voiced by several prominent personalities in finance at the state-backed finance conference in Abu Dhabi, where AI was a leading topic of discussion.
Views from Big Players
Several of these financial heavyweights offered their insights into the current situation and future prospects of AI investment.
Jenny Johnson, CEO of Franklin Templeton: The Early Days
Jenny Johnson compared the current market activity and concerns about an AI-related bubble to the early days of a gold rush. She argued that while some stocks might be overpriced, the AI revolution represents one of the most significant technological changes in our lifetime. She also suggested that the transformative impact of AI on company earnings and other economic indicators might not be fully visible for several years. Franklin Templeton currently manages investments totalling about US$1.7 trillion.
Stephen Schwarzman, CEO of Blackstone: The Electricity Factor
Stephen Schwarzman pointed out that AI is now affecting nearly every aspect of economic activity, leading to massive capital expenditure and increased demands on electricity. He warned that meeting these demands could require doubling the size of our electricity grid, a major undertaking with far-reaching societal implications.
Shiv Srinivasan, CIO for Public Markets at ADIC: The Opportunity
Shiv Srinivasan of the Abu Dhabi Investment Council (ADIC) sees AI-related stocks as a favorable opportunity, despite their soaring valuations. He expressed continued interest in AI and biotech, viewing them as big winners in the investment landscape.
Chris Hohn, Founder of TCI: A Word of Caution
Chris Hohn, founder of the US$60-billion hedge fund TCI, expressed skepticism about the positive effects of AI on companies and their stocks. He warned that disruption caused by AI might not necessarily be beneficial and that the number of attractive investment opportunities is decreasing.
Raj Agrawal, Global Head of Real Assets at KKR: The Data Centre Debate
Raj Agrawal suggested that the best way to invest in the massive opportunity provided by AI is through data centres. However, he cautioned against paying large multiples that rely on growth within a certain period to recoup the investment. He cited the example of Oracle, which is investing so heavily in its AI data centres that its free cash flow is projected to be negative for years.
