Aware Super CIO warns of orange lights in AI financing as valuations soar
SYDNEY, Dec 9 (Reuters) – The chief investment officer of Australian superannuation fund Aware Super said “orange” lights were flashing on some financing arrangements in the global artificial intelligence industry but earnings growth supported the sector’s current valuations.
Last week, Simon Warner, CIO of the A$210 billion ($135.75 billion) fund, said the future course of the AI industry’s economic model was the most significant financial market risk in 2026.
As investors question when large capital investments will turn a profit, rising artificial intelligence stock valuations have begun to put pressure on global markets.
“For most of the last few years, we’ve been very comfortable that capital investment in both large language models and data centers and all the infrastructure that supports AI has come from very stable sources of funding, largely from retained earnings,” Warner told Reuters in an interview.
“There have been some instances over the last six months where that has softened a little bit, there’s more cyclical financing, there’s a little bit more channel financing. There’s nothing that’s flashing red, but there’s definitely things that are flashing orange.”
Warner said there was an interdependence between capital spending valuations in the so-called “Magnificent Seven” stocks and broader wealth impacts and domestic demand in the US.
“I think there is a dynamic there, but if one of those pillars stumbles then we can make a correction,” he said.
“This is something we’re watching very closely.”
Meta said it struck a $27 billion financing deal with Blue Owl Capital in late October to finance the largest data center project globally, at a time when major technology companies are racing to build the infrastructure needed to power their AI ambitions.
Microsoft was the second-largest stock investment listed in Aware’s balanced fund at the end of June, filings show. It also owns Nvidia, Apple, Alphabet and Meta, among others.
Warner said some investors are cautious about stock valuations related to artificial intelligence and technology, but there are risks to those valuations if capital spending levels begin to decline.
($1 = 1.5101 Australian dollars) (Reporting by Scott Murdoch; Editing by Sonali Desai)
