Professional investors’ AI bubble fears centre on software

Wealth managers and family offices are increasingly worried about a potential artificial intelligence (AI) stock bubble, with their concerns primarily focused on software firms, according to research from Robocap.

Its study of wealth managers, family offices, pension funds, and insurance asset managers showed that 30 per cent were very concerned about a possible AI investment bubble, while 70 per cent were quite concerned.

However, the research found that professional investors were almost three times as worried about a bubble in AI software than in hardware.

More than four in five (84 per cent) felt there was a potential investment bubble around software, such as frontier models, compared to 29 per cent who felt the same about data centres.

Two thirds (66 per cent) of respondents said the debate about whether AI stock prices were in a bubble or represented good long-term value would depend on the sector.

A fifth (20 per cent) believed that today’s AI prices would be seen as a bubble in five years’ time, while 14 per cent said they would be seen as a ‘bargain’.

Almost all (99 per cent) professional investors felt companies were currently spending too much on AI infrastructure, while the same proportion believed the main US hyperscalers would increase or maintain spending on AI datacentres next year.

“The AI bubble debate has been running for a long time and will continue to do so as the sector continues to outperform,” said Robocap founder and CIO, Jonathan Cohen.

“Institutional investors and wealth managers are clearly concerned about the risk of an AI bubble but the research shows the debate is becoming more nuanced with professional investors discriminating between different types of AI firms and concerns focusing more on software than hardware.

“The bubble or bargain debate clearly has a long way to run with investors increasingly looking past the generalised AI hype to look for stocks which will genuinely reap the benefits of the AI revolution.”

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