Norway wealth fund sounds alarm on AI stock market bubble

Norway's Government Pension Fund Global, the world's largest sovereign wealth fund, has expressed concern over the potential risks posed by artificial intelligence (AI) investments. CEO Nicolai Tangen warned that a significant loss to the fund's $2.4 trillion portfolio could be "not completely improbable" in an extreme market collapse.

While the fund has delivered impressive profits in the past, Tangen emphasized that the AI-chip trade's current high valuations present a serious risk, warning that a sharp market correction could erase much of the wealth accumulated over the past three decades. The fund, which finances about a quarter of Norway's government budget, primarily follows a passive, broadly diversified global index strategy, allocating roughly a third of its stock investments to technology.

However, this strategy limits the fund's ability to hedge against potential losses. Analysts suggest that while many investors are cautious about AI stock valuations, they are hesitant to take profits due to the fundamental nature of the technology, which is driven by unprecedented capital spending. Norway's oil-rich fund, which benefits from continuous inflows of oil and gas revenues, faces unique challenges compared to other sovereign wealth funds, including China's rapidly developing AI models at lower costs.

Despite some recent rebounds, AI-related stocks remain volatile, with some analysts predicting further growth throughout the year.