AustralianSuper, managing $400 billion in assets, is closely monitoring the impact of artificial intelligence and geopolitical tensions on the global economy. Alistair Barker, head of asset allocation, observes an AI arms race between the US and China, which he believes is currently advantageous for investors. AustralianSuper is one of Australia’s largest superannuation funds, focused on providing retirement savings for its members. The fund’s asset allocation team works on thematic issues, geopolitics, market strategy, risk management and portfolio construction to set the fund’s investment strategies.
Despite potential risks, Barker believes valuations in the AI sector are high, but not yet in bubble territory, citing genuine earnings growth in several companies. He acknowledges that while some private AI companies are still working towards full monetisation, listed US tech companies have shown material improvements in their earnings profiles. Barker draws on historical patterns of industrial revolutions, noting the potential for pullbacks and inflection points in AI’s development, adding that productivity benefits from AI adoption should start becoming apparent.
Barker also highlights the potential for a loss of public trust in AI as a significant risk, referencing potential Cambridge Analytica-like events. He also notes government policies, such as water and energy management, could also impact AI and data centre rollouts. Despite these risks, Barker sees opportunities for investors in a world of higher debt and sticky inflation, as returns on cash or fixed interest are higher than they were five years ago.
Additionally, stretched government balance sheets provide opportunities for institutions such as AustralianSuper to invest in infrastructure. Barker believes that governments reaching their spending limits will open doors for private sector involvement. He also cautions against overreacting to policy changes, noting that markets can sometimes be overly concerned about potential outcomes.
