Could China be a hedge against risk of AI investment boom going bust?

These are testing times for the artificial intelligence (AI) trade that has been driving global equity markets. No other investment theme comes close to rivalling the importance of the AI boom as the world’s largest technology companies spend vast sums of money on data centres, memory chips and computing power.

At the same time, no other risk divides opinion more than the threat of a dramatic and sustained sell-off in AI-related stocks. According to the latest Bank of America global fund manager survey on July 14, 43 per cent of respondents believed AI shares were in a bubble, while 48 per cent said they were not.

Uncertainty over the future of the AI boom is exacerbated by frequent shifts in the narrative around the technology. Last year, monetisation was the main concern as investors fretted about the mismatch between the colossal spending on the AI buildout and the relatively meagre revenues from AI companies and services. Earlier this year, fears shifted to displacement amid concerns about AI tools upending established business models, particularly in the software industry.