World's Largest Hedge Fund on AI Boom: "Big Four to Invest $650 Billion...Entering a More Dangerous Stage"

Bridgewater Associates analysis

Greg Jensen, co-Chief Investment Officer (CIO) of Bridgewater Associates, the world's largest hedge fund, has warned of the "risks" surrounding the artificial intelligence (AI) boom. He pointed in particular to a surge in investment in physical infrastructure and a growing reliance on external capital.

On the 24th, The Asia Business Daily reported, citing major foreign media, that CIO Jensen said in a letter to clients that "demand for computing continues to far outstrip supply, forcing hyperscalers (large-scale data center operators) to invest at an ever-faster pace in order to keep up with demand."

AI. Yonhap News

Big Tech companies are reported to have drastically scaled back share buybacks in order to secure funds for rapidly increasing capital expenditure. However, Jensen warned that "because the scale of investment is so large, any shock could create substantial downside risk."

In particular, there is analysis that Anthropic and OpenAI, ahead of potential initial public offerings (IPOs), need breakthrough results that can justify massive fundraising. If they fail to present a clear path to generating high returns, it may be difficult to convince investors of their lofty valuations and enormous capital needs.

Bridgewater expects four companies - Alphabet, Amazon, Meta Platforms, and Microsoft - to invest a total of 650 billion dollars this year to expand AI-related infrastructure, a sharp increase from 410 billion dollars last year.

Jensen analyzed that the expansion of AI investment is weighing on other industries, and that the recent correction in software stocks reflects this. "For leading AI companies to meet investor expectations, they have reached a stage where they can hardly avoid creating structural risks for other industries such as software," he said.

Bridgewater assessed that large-scale investment by technology companies is helping to boost U.S. growth. Last year, technology investment lifted U.S. gross domestic product (GDP) growth by about 0.5 percentage point, and this year it is estimated to be able to contribute around 1 percentage point.