Market rebalancing AI boom investment risks: DBS chief

The market is repricing the risks around investments related to the buildup of artificial intelligence (AI) that could lead to more discipline in financing, according to DBS Group Holdings Ltd chief executive officer Tan Su Shan (陳淑珊).

“The market has spoken,” Tan said in an interview yesterday. “It’s not a bad thing because now, people are asking for higher returns, and people are also looking at structures. They’re making sure that whatever money is now being hoovered into the whole AI capex ecosystem will lead to some kind of long-term ROI [return on investment] that can then be repaid back to debt or bond or equity holders.”

Tan, who leads Southeast Asia’s biggest lender, said weaker firms might see their credit ratings revised downwards, although this risk repricing is “healthy” as the market wants to make sure that big financial commitments are sustainable.

DBS Group Holdings Ltd CEO Tan Su Shan takes part in a panel discussion at a conference in Singapore on Oct. 3.

Photo: Bloomberg

Her comments come as tech giants spend billions on AI, and as market gains concentrate in a handful of stocks. Interest rates are rising and bond yields around the world have surged to the highest in decades, increasing the cost of funding the enormous investment needed to build AI infrastructure. PricewaterhouseCoopers LLP estimates Asia’s spending on data centers could reach US$8.2 trillion by 2050.

DBS has originated about S$25 billion (US$19.5 billion) of AI deals this year, often as lead manager on syndicated loans and has held only a fraction of that, Tan said. The financing is mostly for hardware, from semiconductors and memory chips to data centers, she added.

Tan was speaking on the sidelines of DBS’ conference in Singapore focused on key topics such as AI and geopolitics. In her opening comments, Tan said she has not seen this kind of volatility in interest rates for a long time, with equity investors whipsawed by swings in AI stocks.

Tan has made AI key to her strategy since taking the helm in March last year. The Singapore-based bank is starting to see results from large AI projects that are underway to overhaul its work flows and processes, including fee growth and new accounts being opened at a faster pace, she said.

Tan said the wealth management business has long term structural tailwinds as Asia creates more wealth, capital markets deepen and intergenerational wealth transfer happens. While market swings would affect flows in the short term, net new money growth has been “consistently strong,” she added.