Temasek Investment Officer Says AI Drawdown is the Biggest Risk
Temasek International Chief Investment Officer Rohit Sipahimalani stated at the Milken Institute Asia Summit in Singapore that the drawdown from AI trading is the current biggest risk in the market. He also mentioned that this is not an immediate concern, as there could be turbulence in 2027.
The second key risk he identified for 2027 is inflation, along with the interest rate environment pushing bond yields to a level that could end the stock market rally. Global bonds have fallen due to energy prices and fiscal borrowing demands, with bets shifting towards further rate hikes by central banks. He did not provide a triggering date.
He categorized the triggers for AI drawdowns into two types: one is tighter regulations due to safety concerns, and the other is clients not receiving sufficient returns from technology expenditures. U.S. stocks are near record highs, which he attributes to AI, even as treasury yields have risen, supported by the earnings of major related companies. The upcoming quarterly reports will be used by the market to assess whether the hundreds of billions in spending have turned into profits.
Positions have not contracted following the warnings. As of March 31, Temasek managed S$518 billion (approximately US$405 billion). This year, it committed to increasing its AI-related allocation from 6% to a maximum of 15% by 2031, holding investments in companies like OpenAI, Anthropic, and NVIDIA. About half of the AI exposure is in the public market, and he hopes to increase this to 70% to 75%, as publicly listed assets are easier to adjust than private equity.
Buyers still view profits as a reason for continued stock price increases, while sellers have yet to appear. The event is a summit statement, not a reduction announcement. The direction of funds is said to continue adding to AI but allocating more shares to tradable public assets. Beneficiaries are still profitable public AI companies, while those locked in private equity, with insufficient client returns or facing safety regulations, are under pressure. Inflation is seen as another factor that could disrupt the stock market.
Source: Public Information
ABAB AI Insight
Temasek's AI investments are already reflected in its holdings. As of March 31, the scale is S$518 billion, with an AI allocation of 6% and a target of up to 15% by 2031, including names like OpenAI, Anthropic, and NVIDIA. Sipahimalani identified the biggest risk as trading drawdowns while also pulling the public market share from about half towards 70% to 75%. The warning is about the difficulty of exiting, not the list of targets.
Resources are shifting from locked private equity to tradable shares. Public assets can be adjusted in response to tighter regulations or insufficient client returns, while private equity cannot. The motivation is that treasury yields have already risen, and stocks are still supported near record levels by a few AI profits, with the next quarterly reports needing to answer whether the hundreds of billions in spending have turned into profits. Inflation is identified as the second risk for 2027, with the pathway being energy and fiscal borrowing pushing up bond yields, potentially hitting a breaking point for the stock market.
The analogy is the telecom capital expenditures before 2000 and the valuation compression of growth stocks during the rate hikes in 2022. Temasek is in a phase of expanding while reserving exit options: the allocation ratio still needs to increase, and the vehicle is changing to more easily sellable public stocks. It is not a short fund; state capital seeks to balance ten-year allocations with one-year liquidity.
This represents a shift in pricing power. The prices of AI trades are currently determined by profit and expenditure narratives, while Sipahimalani is handing over the next round of pricing power to regulations and client returns. The mechanism is that safety incidents can tighten rules, and if clients do not recoup their expenditures, orders will decline ahead of models. Increasing the public market share means retaining the right to sell in advance. The biggest risk is identified as drawdowns, yet the position actions continue to buy and switch to more easily sellable methods.