Temasek CIO says unwinding of AI trade is biggest risk to markets

An unwinding of the artificial intelligence trade — a reversal of investor positions in AI-related stocks — poses the biggest risk to markets, Rohit Sipahimalani, chief investment officer of Singapore state-owned investment firm Temasek, said at the Milken Institute Asia Summit in Singapore, CNBC reported on 7 October 2026. "We don't see that as imminent, but will you have bumps in 2027? Yeah, possibly yes," Sipahimalani said.

Sipahimalani said AI has been one of the key forces keeping U.S. stocks near record highs even as Treasury yields — the interest rates on U.S. government debt — have surged, pointing to the earnings strength of major companies tied to the technology. The S&P 500 has remained around record territory despite the rise in borrowing costs, supported by "AI and the earnings momentum around the key players," he said.

He said the strength at the index level masks weakness beneath the surface. Sipahimalani noted that roughly half the stocks in the Russell 3000, an index of U.S. stocks, were at least 20% below their June highs. CNBC reported that this highlighted how much the market's resilience has depended on a small group of winners.

A reversal in the AI trade could be triggered by several factors, he said. He cited safety concerns that lead to tighter regulation, and signs that customers are failing to generate sufficient returns from their spending on the technology.

Temasek remains bullish on AI over the longer term and has continued to increase investments in the sector, Sipahimalani said. About half of the firm's AI exposure is currently in publicly traded assets, a proportion it would ideally increase to around 70% to 75%, he said. He said that would give Temasek greater ability to adjust its investments as the industry evolves, compared with private assets that can be harder to exit quickly.

"One of the things we recognize is that AI is such a fast-changing environment that things could change quite easily, and you have to be able to pivot," Sipahimalani said. Temasek has invested in private AI model developers such as OpenAI and Anthropic, but "the size of exposure there would be different compared to some of the other areas where we have more flexibility," he said.