BlackRock and Deutsche Bank CEOs Refute AI Bubble Concerns, Cite Fiscal Deficits and Capital Competition as More Urgent

On October 21, opinions among several financial executives diverged regarding whether AI has formed a bubble. Billionaire Ken Griffin previously warned that AI investors are almost certainly in a bubble and should prepare for setbacks, noting that significant economic transformations are often accompanied by bubbles. Recent market concerns suggest that the massive upfront capital expenditures required for AI may take longer than expected to translate into profits and productivity gains.

Deutsche Bank CEO Christian Sewing stated that there is currently no reason to worry about a sharp reversal in asset prices in the short term. While some companies may face setbacks, he does not believe the market is in a bursting bubble. He distinguished between bubbles and ongoing volatility, mentioning the impact of geopolitical tensions. He also stated that if the regulatory framework is appropriate, the industrial application of AI could become a century opportunity for Germany.

BlackRock CEO Larry Fink advocated for accelerating the construction of AI data centers, warning that delays could threaten economic growth and exacerbate inflation due to high computing costs. He previously pointed out that AI faces a supply shortage, with demand growth also exceeding expectations. Fink remarked, "The faster we build more data centers, the more computing power we have, and the quicker we can reduce costs."

Steve Chiavarone, Chief Investment Officer of Global Equities at Federated Hermes, believes that investors concerned about an AI bubble may be correct in their judgment, but it is several years too early, as there is still several years of growth potential in infrastructure development, after which the risk of overbuilding will become more pressing. He noted that the market is still differentiating which companies can secure funding and at what interest rates, which contrasts with the performance during bubble periods.

Compared to the AI bubble, both Fink and Sewing view fiscal deficits as a more pressing concern, especially as the AI industry competes with the government for investment funds. The U.S. fiscal deficit is nearing $2 trillion, and U.S. Treasury yields have risen to decades-high levels. Fink stated that the intensity of capital competition is at the highest level he has seen in his career. Regarding the rising risk of French government bonds, Sewing remarked that it cannot yet be termed a debt crisis, but it serves as a warning for public finances, emphasizing the importance of budget discipline.