Fund managers across Asia are pulling back from blind faith in artificial intelligence, choosing instead to back firms that can ride the AI wave without getting swept away by it. That was the clear message on Thursday at the Reuters NEXT Asia event in Singapore, where some of the region’s biggest investors talked openly about how hard it has become to build portfolios in the age of AI.
Global markets have soared to record highs, largely powered by everything AI-related, from chips to data centres to software. But that optimism is starting to wear thin. Investors are now questioning whether the rapid pace of profit growth can hold up, and whether the huge spending pouring into AI infrastructure will ever generate significant returns. It’s a fair question, and one that’s shaping how big money moves right now.
Temasek offers a good example of this shift in thinking. Rohit Sipahimalani, chief investment officer at the state investor (TEM.UL), said in an interview that the fund still wants to ride that trend — but carefully. “You want to ride that trend,” he said, before adding a warning of his own. “The equally big issue is disruption because of AI to many other businesses.” That’s why Temasek has quietly shifted more of its exposure toward businesses anchored in hard assets — the kind less likely to be disrupted overnight by a new AI tool.
The cautious tone doesn’t mean Temasek is stepping back from AI altogether. The fund, which already owns stakes in Anthropic and OpenAI, is targeting a major increase in its AI investment. It wants to lift exposure to the technology to as much as 15% over the next five years, up sharply from just 6% today. As Sipahimalani put it, “You’ve got to look at the entire value chain.” Some corners of that chain are pure froth, he said, while others are already producing steady cash flows. “We try to play across the entire spectrum,” he added, summing up the challenges that come with constructing portfolios when nobody quite knows where the froth ends and the real money begins.
This hunt for balance has a name among managers: the picks and shovels approach. Rather than wager everything on the flashiest AI companies, some are backing the tools and infrastructure quietly working behind the scenes. Semiconductor stocks have handed out astronomical gains in recent years, but soaring valuations and sharp selloffs have become almost common now, and that volatility is feeding real scepticism about whether this is another AI bubble waiting to pop.
Stephanie Hui, who runs private equity and growth equity for Asia-Pacific at Goldman Sachs Asset Management, argued that picking winners doesn’t need to be complex. “I am not smart enough to tell you today which applications are going to be winning, it’s way too early,” she told the panel at the event. Her team has instead backed a company that specialises in liquid cooling, along with data centres — unglamorous bets, perhaps, but ones tied directly to real AI adoption rather than the front end of the AI revolution.
That’s the broader major theme now shaping how Asian investors think: back what actually facilitates AI, not just what claims to dominate it. “We are not going for the front end at this moment,” Hui explained. “We are going for the simple stuff that facilitates an end proxy for AI adoption.” It’s a quieter, less flashy strategy, but one built to survive whichever consumer applications sectors end up winning the race.
Not every voice at the event shared the same optimism. Fred Hu, chairman of China‘s Primavera Capital Group, called himself a believer in the AI story but admitted growing concern about over-exuberance creeping into the markets. “As valuations keep going up, as more and more capital goes into AI… it begs the question, how much is enough,” he said, a line that drew nods from others in the room.
Satoshi Ueyama of Bain Capital Japan struck a similar note of cautioning. He said there are still ample investment opportunities out there, but warned that for AI infrastructure spending to truly make sense, projects need real end-users, not just promises. His firm‘s focus is on identifying AI-enabled winners across services and consumer applications sectors, rather than chasing hype for its own sake.
“AI is real, but at the same time there’s no denying some parts of the markets are over-excited,” Ueyama said during the Singapore panel, echoing a fear shared by several investors in the room. “Not all AI investment is going to be successful at this stage,” he added, a reminder that even in a boom, not every bet pays off.
Taken together, these views paint a picture of an AI investment landscape that’s maturing fast. Asian investors aren’t walking away from the speculative bubble risk, and they’re not pretending the scale of spending on AI infrastructure is sustainable forever either. What’s changed is the discipline behind the decisions — a more sceptical, more selective approach to figuring out which firms will actually benefit from AI, and which ones will simply get left behind by it.
