Norway wealth fund warns of AI-driven stock market bubble
The head of Norway's sovereign wealth fund has warned that soaring AI-driven stock valuations could trigger a sharp correction. How exposed is the world's largest sovereign wealth fund to a market downturn?
Norway's Government Pension Fund Global, the world's largest sovereign wealth fund, has warned of a potential AI-driven stock market bubble. CEO Nicolai Tangen cautioned that an extreme market collapse could lead to substantial losses in the $2.4 trillion portfolio. The fund, established to invest Norway's oil and gas revenues, posted a record profit of $186 billion in the first half of the year.
However, the rapid growth of the AI-chip sector, which now accounts for a quarter of the Norwegian government's budget, poses a significant risk, according to Tangen. Despite this, many traditional fund managers remain cautious, according to Bill Megginson, a finance professor at the University of Oklahoma. China's rapid development of affordable AI models also adds to the uncertainty.
Norway's passive investment strategy, which primarily involves buying index funds, limits its ability to hedge against market downturns. While the fund has not explicitly hedged against an AI correction, it has stress-tested such a scenario, estimating a potential 18% reduction in value.
Written by urgent.news from DW News's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
