Pension funds are among the institutional investors becoming increasingly concerned about a potential artificial intelligence (AI) investment bubble, with professional investors nearly three times more likely to identify bubble risks in software firms than in data-centre investments, research from Robocap has found.

The study, which surveyed senior executives at pension funds, insurance asset managers, family offices and wealth managers overseeing a combined USD 513bn in assets across the globe, found that 84 per cent believed there is a potential investment bubble in AI software, compared with 29 per cent who said the same about data centres.

Overall, 30 per cent of respondents said they were very concerned about the prospect of an AI investment bubble, while the remaining 70 per cent said they were quite concerned.

However, the research suggested investors are increasingly differentiating between segments of the AI market rather than viewing the sector as a single investment theme.

Around two-thirds (66 per cent) said whether current AI stock prices are ultimately regarded as a bubble or a bargain in five years will depend on the sector involved.

Just 20 per cent believed today's AI valuations will ultimately be viewed as a bubble, while 14 per cent expected them to be seen as a bargain.

The survey also highlighted concerns around the scale of investment currently being directed towards AI infrastructure, as 99 per cent of respondents said companies are spending too much in the area.

Despite those concerns, respondents overwhelmingly expected spending by major US technology companies to continue.

Nearly all (99 per cent) predicted that US hyperscalers would either maintain or increase spending on AI data centres next year, including 34 per cent who forecasted an increase and 65 per cent who expected spending to remain at current levels.

Commenting on the findings, Robocap founder and chief investment officer, Jonathan Cohen, said: “The AI bubble debate has been running for a long time and will continue to do so as the sector continues to outperform.

“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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