China AI push threatens US rally, Australian pension fund warns
Critics argue that valuations on AI-related equities are stretched
[MELBOURNE] Cheaper artificial intelligence (AI) tools from China threaten to trigger a sudden sell-off in US tech giants betting on generative AI, according to the investment chief at one of Australia’s largest pension funds.
DeepSeek’s development has shown Chinese companies can make large language models (LLMs) that deliver a similar product for less, John Pearce, chief investment officer of A$158 billion (S$135 billion) UniSuper, said at the Bloomberg Forum for Investment Management in Sydney on Wednesday (Oct 29).
His concern comes as US tech stocks posted fresh all-time highs, with Microsoft, Nvidia and Apple now all topping US$4 trillion in market value.
“If they are developing their LLMs and doing it much, much cheaper than the Americans and still giving the same output, well that’s going to put a big question mark on your business model,” said Pearce. The risk of more “DeepSeek moments” is “an immediate threat that doesn’t get spoken of a lot”, he said.
Critics argue that valuations on AI-related equities are stretched, with many companies still in early proof-of-concept stages and investor enthusiasm reminiscent of past tech bubbles. Nvidia CEO Jensen Huang on Tuesday dismissed concerns and said that his firm’s latest chips are on track to generate half a trillion US dollars in sales.
Meantime, Pearce maintained a broader upbeat outlook, in part informed by developed market governments having entered an era of “perpetual stimulus” since the pandemic.
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That’s created “pretty good investment opportunities in private credit, for example”, said Pearce. “I’m pretty bullish on private credit because I’m not too concerned about the business cycle.”
Speaking at the same event, Jonathan Armitage, CIO for Colonial First State, and Anna Shelley, AMP’s CIO, shared a positive outlook on private credit. Recent issues with US companies First Brands and Tricolor had not sparked any urgency to rethink allocations.
“We have made some reasonable commitments to private debt in recent years and that’s all been outside of Australia,” said Armitage, adding that he had not seen evidence of anything more systemic.
“Corporates still seem pretty robust,” said Shelley. “We would only become worried about private credit in the US if we saw a real fracturing of that underlying strength.” BLOOMBERG
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