Financial leaders emphasize caution in navigating the market’s rapid changes

Amid the global investment boom in artificial intelligence, leading financiers gathered in Hong Kong are divided on whether an “AI bubble” already exists, while many acknowledged potential risks, and called for a more prudent and diversified approach.

Speakers shared their views at the fifth edition of the Global Financial Leaders’ Investment Summit, organized by the Hong Kong Monetary Authority. The three-day event attracted some 280 prominent global financiers, including about 120 group chairpersons and CEOs.

Themed “Rethinking the Playbook”, the event aimed at building financial market resilience amid extended episodes of geopolitical conflicts, persistent inflation, fiscal challenges and rapid AI expansion.

Morgan Stanley Chairman and CEO Ted Pick said capital investment in the AI segment over the next 10 years could reach up to $15 trillion, of which $2 trillion to $3 trillion has already been deployed or committed.

Emmanuel Roman, CEO of PIMCO, a California-based fixed-income investment management firm, said the AI industry may require about $2 trillion in annual capital expenditure. “The funding will eventually become too large, and sooner or later, there will be a receding tide, and then problems will arise, with rising US interest rates, the war in the Middle East, and even the Eurozone crisis potentially triggering a turning point,” he said.

Ronald O’Hanley, chairman and CEO of Boston-based financial services company State Street Corp, said it is currently difficult to view AI as a “bubble”, as market demand supports the massive investment. He said the real question is whether AI will eventually become so efficient that all the capacity currently being built will become unnecessary.

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Blackstone President and Chief Operating Officer Jon Gray said capital misallocation is not surprising amid the current investment boom. Five companies in the S&P 500 now account for 40 percent of the index’s total market capitalization, reflecting a problem of “concentration”, he added. But he remains confident in AI infrastructure and said the impending productivity gains and changes in consumer behavior should not be underestimated.

David Solomon, chairman and CEO of Goldman Sachs, said that as not all AI investments will yield long-term positive returns, he recommends a diversified asset allocation and a balanced portfolio strategy that avoids relying on a single investment.

HSBC Group CEO Georges Elhedery noted strong market demand for gold as a diversification asset. “Gold is a safe-haven asset and an excellent tool for hedging against inflation, possessing unique value that other assets do not have,” he said.

Zhang Hui, vice-chairman and president of Bank of China, said, “Renminbi-denominated treasury bonds will play a bigger role in global investors’ asset allocation decisions because this asset is safe and liquid, has low correlation with European and US treasury bonds, and offers a stable exchange rate.”

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Speaking at a luncheon, Hong Kong Financial Secretary Paul Chan Mo-po discussed the use of AI across the industry, including for assessing investments, analyzing information and improving efficiency. “The issue is not simply whether a company uses AI, but whether AI is changing how it operates, serves customers and generates revenue,” he said.

He added that the Chinese economy will offer the greatest opportunities for AI application. “Across the Chinese mainland, factories, hospitals and logistics networks provide extensive opportunities to test AI and develop new businesses. The country’s comprehensive industrial base and wealth of real-world applications make it fertile ground for AI-native growth.”

Chan said the special administrative region is adopting a “Finance+” strategy through financing innovation and growth as well as building global enterprises.

“We will continue to uphold openness, clear rules and investor protection, on which confidence depends,” he said.

Contact the writers at oswald@chinadailyhk.com