Investors shift focus from AI hype to AI infrastructure

Washington DC [US], July 11: Asian investors struck a cautious tone on artificial intelligence as they increasingly wager on businesses that can withstand the AI-led disruption and look for firms that stand to benefit from application of the technology.
Global markets have soared to record highs powered by all things AI but investors have started questioning whether the rapid pace of profit growth can be sustained and whether the huge spending on infrastructure will see significant returns.
The skepticism was on display at the Reuters NEXT Asia event in Singapore where managers of large funds spoke about the challenges they face in constructing portfolios in the age of AI. "You want to ride that trend," said Rohit Sipahimalani, chief investment officer at Temasek, noting the Singapore state investor aims to increase its AI investment. "But the equally big issue is disruption because of AI to many other businesses...
We've increased our exposure to businesses that are more around hard assets, which are likely to be less disrupted by AI," Sipahimalani said in an interview at the Reuters NEXT Asia event in Singapore on Thursday.
Temasek, which owns stakes in Anthropic and OpenAI, is targeting a major increase in investment in AI companies, aiming to lift exposure to the technology to as much as 15 percent over five years from 6 percent now, it said on Wednesday. "You've got to look at the entire value chain," Sipahimalani said.
"There are some areas where there's froth, the other areas where there's real cash flows." "We try to play across the entire spectrum," he said. Investors have long been skeptical of astronomical gains in AI and semiconductor stocks, questioning whether another speculative bubble is on the way, with soaring valuations and sharp selloffs increasingly becoming common. Some have started to look further down the value chain as the place to be. For Stephanie Hui, head of private and growth equity Asia-Pacific at Goldman Sachs Asset Management, investment targets are less complex.
"I am not smart enough to tell you today which applications are going to be winning, it's way too early," Hui said in a panel at the event, adding her firm has invested in a company that specializes in liquid cooling as well as data centers.
"We are not going for the front end at this moment... We are going for the simple stuff that facilitates an end proxy for AI adoption," she said.
AI remains the major theme for markets, investors said, but there is concern about the scale of spending, the kind of returns they may end up seeing, and fear of an AI bubble. "I'm a big believer in the AI revolution but as valuations keep going up, as more and more capital goes into AI... it begs the question, how much is enough," said Fred Hu, chairman of China's Primavera Capital Group, cautioning against over-exuberance in markets.
Satoshi Ueyama of Bain Capital Japan said there were ample investment opportunities but cautioned that for AI infrastructure investment to make sense, they need end-users. Ueyama said his firm's focus is to identify AI-enabled winners, including in services and consumer applicationssectors.
"AI is real but at the same time there's no denying some parts of the markets are over-excited... Not all AI investment is going to be successful at this stage," he said at a panel in Singapore. View the live broadcast of the World Stage and read full coverage of the summit here.
Source: Qatar Tribune