Investors divided over AI: high expectations leave markets vulnerable

Investors who suspect that an AI bubble is forming are slightly less likely to identify AI as an investment opportunity. Even among this group, however, AI ranks joint first as an attractive investment opportunity. According to Mary Pieterse-Bloem, this illustrates the conflicting views investors currently hold: ‘They see the enormous economic potential of the technology, but at the same time question whether expectations in the stock market have run too far ahead of reality.’

Difficult for investors to avoid AI

According to Pieterse-Bloem, who also heads the Investment Office at Rabobank, AI is also becoming almost impossible for investors to avoid. Dutch investors commonly invest through diversified funds, and shares and bonds of AI-related companies have acquired an increasingly large weighting in many of these funds. ‘What happens around AI therefore matters to virtually every investor,’ says Pieterse-Bloem.

One in four retail investors say they specifically invest in AI, for example through shares in companies involved in artificial intelligence. At the same time, almost one-third of investors hold views about AI stocks that Rabobank considers consistent with the formation of financial bubbles. They consider AI stocks overvalued, for example, while also expecting share prices to be at least as high next year.

‘Markets are highly sensitive to disappointments’

Pieterse-Bloem sees this combination of high expectations and uncertainty as a possible sign of an AI hype in equity markets: ‘When expectations surrounding a particular theme are very high, while investors simultaneously question whether those expectations are realistic, markets become highly sensitive to disappointments.’ This does not necessarily mean that a bubble is about to burst, she stresses. It can, however, result in greater volatility and more unsettled financial markets.

Geopolitics remains the biggest threat

Alongside concerns about potential bubbles, geopolitical developments remain the biggest threat to investors’ portfolios. Wars and conflicts outside Europe, as well as the role of the United States on the global stage, are among the concerns most frequently mentioned. The share of investors ranking bubbles among their three biggest threats has risen from 14 per cent last year to 21 per cent this year.