Temasek CIO flags AI unwind and inflation as top 2027 risks

The chief investment officer of Temasek has described an unwinding of artificial intelligence trades as the largest threat to global markets. Temasek retains plans to grow its AI portfolio to over twice its current size by 2031.

Rohit Sipahimalani delivered these remarks on Wednesday at the Milken Asia Summit 2026 in Singapore. He additionally pointed to another risk for stock markets and an intended change in the way Temasek manages its AI positions.

Temasek CIO Identifies Two Major Market Threats for 2027

Sipahimalani views an AI unwind as not immediate, but he acknowledged that markets might encounter disruptions in 2027.

“The unwinding of the AI trade is the biggest risk…We don’t see that as imminent. But, will you have bumps in 2027, possibly yes,” he said.

These disruptions would impact Temasek, as its returns have been heavily dependent on AI thus far. The S$518 billion ($405 billion) investment company has stakes in multiple top AI companies, including OpenAI, Anthropic, and Nvidia.

Temasek also aims to increase AI-related investments from 6% of its portfolio to as much as 15% by 2031. Since AI evolves rapidly, Sipahimalani seeks to make that exposure more flexible.

Roughly half is currently in public markets, and his preference is to boost that proportion to between 70% and 75%. Publicly traded assets offer Temasek greater ability to shift direction, according to Sipahimalani, whereas private holdings offer limited maneuverability.

Sipahimalani's other worry is beyond AI, focusing on inflation and the interest-rate landscape. Bond markets are already experiencing that strain. Per Bloomberg, worldwide bonds have declined as energy prices and sovereign debt fuel expectations of additional rate increases.

“Inflation is a risk, together with what is happening in the rates environment, that means there probably is a risk of some breaking point in the equity market at some point,” he added

He categorized this alongside AI as the two main threats he anticipates for 2027.

Dalio, Burry, Hayes, and Cramer Have Also Warned About AI

Additional well-known investors have voiced worries about the AI surge. Ray Dalio, founder of Bridgewater Associates, characterized AI as a textbook bubble approaching its pop. He linked the danger to debt-financed expenditure and climbing interest rates.

In late September, Michael Burry stated that the AI bubble could pop earlier than he initially anticipated. Arthur Hayes also foresees a collapse of the AI infrastructure build.

Up to now, equities have dismissed these cautions. The S&P 500 and Nasdaq 100 reached all-time highs this week, driven by optimism regarding technology earnings.

Nevertheless, interest rates continue to be a stress factor. Jim Cramer cited the effect of elevated interest rates on stocks as his primary current concern. The Mad Money presenter anticipates that earnings season will reveal how more expensive borrowing is affecting businesses.