A “hype bubble” is building in early-stage AI venture investing, warns GIC Pte’s chief investment officer, who joins a growing chorus of investors sounding alarms over the sector’s boom.
“If the technology doesn’t catch up and doesn’t deliver as per the high expectations that the market’s pricing in, then we’re in for a bubble,” group CIO Bryan Yeo said at the Milken Institute Asia Summit in Singapore on Friday.
Yeo also warned of a fiscal risk event especially after governments around the world increased borrowing during the pandemic. “The question is whether the world can grow out of this large stock of debt,” he said.
He added it’s politically difficult for governments to go to their electorates to cut spending and raise taxes, which might lead to investors forcing the issue at one point with a rise in yields that will scare global markets, and lead to loss of confidence in a country’s currency.
Yeo took the position in April when his predecessor Jeffrey Jaensubhakij stepped down after almost three decades at the Singaporean sovereign wealth fund.
GIC, one of the world’s largest sovereign wealth funds, doesn’t publicise its assets under management but Global SWF estimates the firm manages assets worth US$936 billion ($1.21 trillion). Its executives have predicted a slowdown in the second half of the year alongside rising inflation and uncertainty driven by geopolitical pressures.
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GIC is raising its bar for investing in private credit, Yeo said, citing concerns about the amount of money coming into the market.
In China, GIC has maintained its investments even though the country is going through a major economic transition that will take years, he said. GIC sees “bottom-up” opportunities in spaces where valuations are low and firms in sectors where growth is sustainable, he said, touting its cornerstone investment in Zijin Gold International Co.’s blockbuster initial public offering in Hong Kong.
“There are still some growing pains and I think the clarity we need to really lean in is still developing,” said Todd Sisitsky, president of TPG Inc., when asked about China on the same panel.
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‘Breathtaking moment’
Sisitsky also voiced concern about investment in the AI sector, pointing to some valuations of up to roughly US$1 billion per employee in the early venture world. “It’s sort of a breathtaking moment,” he said.
Like many of its peers, GIC is actively experimenting with AI. The firm has developed a series of internal tools including an “Agentic Devil’s Advocate” chatbot designed to ask tough questions, allowing staff to test their deals and wits against a variety of simulated investment committee members.
GIC is part of a growing cohort of investment firms racing to use AI to transform their operations and enhance returns. Companies including General Atlantic and Blackstone Inc. have touted their developments, while trying to back startups that could one day outshine Alphabet Inc. and Meta Platforms Inc.
GIC executives said in July it was investing in three types of AI firms: enablers that build infrastructure for the sector; monetizers that create and sell AI-infused products and services, often in the form of startups; and adopters which are using AI to improve efficiency in their core business.
“Our expectation is that in the next three to five years there’s going to be a high velocity of value creation, but also value erosion or destruction for those who fail to leap off,” Yeo said, referring to adopters like incumbent listed firms.
