Temasek Flags AI and Inflation as Primary Market Risks for 2026
Singapore state investor Temasek has identified artificial intelligence and inflation as the most significant risks to global markets, even as it plans to increase its own AI exposure.
Temasek investment chief Rohit Sipahimalani highlighted artificial intelligence and inflation as the primary threats to global markets in the coming year. The firm, which is one of Asia's largest investors, expressed concern that heavy capital expenditure on AI infrastructure, such as data centers, chips, and energy, may not yield the expected returns.
Sipahimalani noted that if these investments fail to deliver, the resulting valuation pressure could lead to significant market disruption. The risks are linked, as the high demand for semiconductors and energy driven by AI is contributing to persistent inflation. This inflationary pressure raises investment hurdle rates, making it more difficult for projects to meet the minimum returns required for funding.
Despite these warnings, Temasek plans to increase its AI-related investments from approximately 6% to 15% of its portfolio by 2031. The firm intends to balance this expansion with a focus on maintaining portfolio resilience against economic uncertainty, rising interest rates, and inflation.
Temasek reported a record net portfolio value of S$518 billion, or approximately US$401 billion, as of March 31, 2026. This figure represents a 10.5% increase compared to the previous year.
Other institutions in Singapore are echoing these concerns. The Monetary Authority of Singapore warned of increased capital costs linked to AI spending and the potential for severe fiscal pressure in the event of an AI downturn. A stress test conducted by the central bank on September 22, 2026, indicated that 32% of Singapore-listed firms could experience significant revenue shocks if such a downturn occurred.
Additionally, the ASEAN+3 Macroeconomic Research Office reported that Asian economies are disproportionately exposed to a potential cooling of the AI boom. Investors are now watching to see if US AI capital expenditure generates clear returns and whether the inflationary pressure on energy and chip costs persists.
