Market Risks

Temasek's Warning

Temasek's investment chief, Rohit Sipahimalani, has warned that artificial intelligence and inflation are the biggest risks for global markets in 2026. The firm's concerns center on the wave of US capital expenditure flowing into AI infrastructure, which could trigger significant market disruption if the expected returns do not materialize.

The Inflation Link

Inflation is the second half of the warning, and the two risks are more connected than they look. AI-driven demand for semiconductors and energy is feeding into higher prices, making it essential to track the inflation link closely. If AI demand continues to push up chip and energy costs, it could keep price pressures and interest rates elevated longer than markets would like.

Temasek's Strategy

Despite the warnings, Temasek aims to raise AI-related investments to 15% of its portfolio by 2031. The firm's strategy pairs that expansion with an emphasis on keeping the overall portfolio resilient against rising inflation, interest rates, and broader economic uncertainty. Temasek is doing this from a position of strength, with its net portfolio value hitting a record S$518 billion as of March 31, 2026.

Regional Implications

The warnings from Temasek and the Monetary Authority of Singapore (MAS) raise the stakes for Asian markets specifically. Economies tied closely to semiconductor supply chains and AI-related demand could feel a slowdown more sharply than others. The ASEAN+3 Macroeconomic Research Office (AMRO) has highlighted that Asian economies are disproportionately exposed to the possible fallout once the AI boom cools.

Key Takeaways

The most direct takeaway is that big institutional money is starting to separate AI enthusiasm from AI pricing. Temasek's message is not 'avoid AI,' but rather 'build a portfolio that survives if AI disappoints.' The key things to track from here are whether US AI capex begins to produce visible returns, whether inflation in chips and energy eases or persists, and how central banks respond.