LIVE MARKETS-Can tight credit save AI?

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CAN TIGHT CREDIT SAVE AI?

Higher funding costs may be painful for large AI borrowers and, while that is putting pressure on chipmakers and other AI favourites, there may be a silver lining.

As investors question the sustainability of the sector's spending boom, Pictet Wealth Management argues that tighter credit conditions could ultimately prove healthy by helping to prevent an AI bubble from becoming more dangerous.

"We expect tighter credit availability will likely help deflate the AI bubble without bursting it," writes CIO César Pérez Ruiz in his latest weekly note, recalling BlackRock CEO Larry Fink's remark that he is seeing genuine capital shortages for the first time in his 50-year career.

Pérez Ruiz's view echoes that of other investors who argue that higher funding costs could result in greater discipline on AI investment, tempering excess enthusiasm without derailing adoption of the technology.

Pictet favours companies benefiting from AI adoption over those providing the infrastructure behind the boom.

(Danilo Masoni)

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