‘Mindful’ of AI exposure: wealth managers at Hong Kong summit urge balance in portfolios

Executives at a private wealth conference in Hong Kong have highlighted AI infrastructure as a booming “defence plus growth” investment opportunity, while cautioning investors against portfolios that are overreliant on artificial intelligence.

“Infrastructure opportunities now really lie at the bottleneck of solving [AI’s] demands within structural growth,” the head of Hong Kong managed investments and wealth solutions at Standard Chartered Bank, Sabina Chiang, said during a panel discussion at the Private Wealth Management Association’s annual summit on Thursday.

“AI might be digital, but a lot of the constraints around it are still largely physical,” she said, pointing to demand for data centres, telecoms towers, fibre networks and different sources of power, including nuclear, solar, battery and grids.

That offered investors a growing investment opportunity, she said, adding that “Infrastructure 2.0” was about “shifting from pure defence play to defence plus growth”.

Earlier in the week, senior financiers debated investment opportunities and risks behind the unprecedented demand for AI infrastructure at the Global Financial Leaders’ Investment Summit organised by the Hong Kong Monetary Authority.

At that summit, Pimco CEO Emmanuel Roman said the demand for infrastructure – which could amount to US$10 trillion over the next five years – was, at some point, “going to be too much” and could lead to a downturn.

But Chiang said the criteria behind infrastructure investments remained firm.

“We still want assets to be essential … difficult to replicate … and [we still want] predictable cash flows and inflation adjustments,” she said.

The combination of the growth potential of the AI boom and traditional investment criteria – which created income, portfolio resilience and inflation protection – explained why increasing numbers of private wealth investors had turned to such assets, Chiang said.

But Markus Egloff, head of global wealth solutions at investment firm KKR, said that despite the upsides, investors should be “very mindful” of the AI exposure in their portfolio.

“The S&P 500 has about 40 per cent correlation to AI when you look at earnings and revenue sensitivity of the companies,” he said, adding that investors whose portfolios simply tracked the S&P 500 were heavily exposed to AI.

When investors then looked for investment opportunities in private equity, infrastructure or private credit, Egloff encouraged them to ask: “Do you want to load up on the same thing, or do you want to diversify and have less correlated assets?”

After recent AI stock sell-offs, the CEOs of Goldman Sachs and Morgan Stanley said at the Global Financial Leaders’ Investment Summit on Tuesday that the AI boom was a supercycle that would underpin economic growth in the United States, despite bumps in the road. The S&P 500 fell 4.4 per cent on Thursday, trimming year-to-date gains to 7.4 per cent.

Chiang said the key message was that AI infrastructure was “not just a single solution”, but could be growth-oriented, income-producing or even on the credit side, depending on investors’ needs.