Nicolai Tangen is no stranger to wealth—he oversees an estimated $2 trillion in assets as CEO of Norges Bank Investment Management, the world’s largest hedge fund. But even Tangen isn’t sure about the scale of the ongoing AI stock rally. “It means there’s a risk in the stock market that we haven’t seen before,” he said in the Financial Times’ piece. Not caught podcast last week.
Norway’s sovereign wealth fund, originally established to invest the nation’s oil revenues, owns about 1.5 percent of all shares in the world’s publicly traded companies and is allowed to spend 3 percent of its assets annually. Most of these investments are in the technology sector, with the fund holding a 1 percent stake in Alphabet (GOOGL), Meta (META), Microsoft (MSFT), Amazon (AMZN) and Apple (AAPL). The fund’s investments in these companies, combined with its stakes in Nvidia ( NVDA ) and Tesla ( TSLA ), total about $174 billion.
While Tangen’s fund may be a big investor in leading AI companies, that doesn’t mean he doesn’t care about them. Warning that “we are headed for a period of low returns,” the former hedge fund manager who founded London-based AKO Capital pointed to the dominance of AI-focused companies in the market as a cause for concern. “The leadership in the market is very small, it’s always focused on companies with some kind of AI,” he said Not caughtwe note that the ten largest companies in the US now make up about 20 percent of the US S&P 500 Index by market value.
The AI revolution launched in 2022 revealed OpenAI’s ChatGPT chatbot has been an unprecedented boon for Big Tech. Demand for the new technology has propelled the likes of Nvidia and Microsoft to more than $3 trillion in market capitalization and pushed other tech companies higher in the stock market, leading some to worry that the AI crash could have a negative financial impact.
This focus is “quite troubling,” said Tangen, who noted communication among AI leaders at the top as another alarming development. Dutch company ASML manufactures computer chips, used by the likes of Nvidia, which later sells its AI accelerators to the likes of Amazon, Meta and Microsoft, he said. “There are fewer companies tied to them, and they’re getting bigger and more important,” he said.
Most of these companies are mainly from America. Europe’s lack of big tech companies, on the other hand, is a factor Tangen doesn’t believe will change anytime soon. “In America, you have more AI and less regulation, and in Europe you have less AI and more regulation.” The European Union’s AI Act, for example, emerged as one of the most comprehensive attempts to regulate the technology.
Going forward, Tangen is more concerned about the vulnerability of AI when it comes to national risks. “The main thing to look at is the relationship between the US and China,” the treasurer said, noting the potential impact a disruption in this relationship could have on America’s reliance on Taiwan and its chip supply chains. Such chips play a huge role in everyday life, from “phones, toasters, cars, dishwashers. Everything,” he said.
