{"text":[[{"start":6,"text":"Professional investors have spent the past few years obsessing over AI. Is it a bubble? Which jobs will it disrupt (ie kill)? Which industries will be transformed? How can we back the winners and avoid the losers?"}],[{"start":19.6,"text":"But while investors are looking out at the world and asking how AI could change it, the first thing it has really changed is the ground beneath their feet. AI technology itself, the hype machine that propels it, and its winner-takes-all characteristics are fundamentally resetting the way investors — amateur and professional — allocate funds and diversify risks across every major asset class. We won’t know until it’s too late whether this is a good or bad thing."}],[{"start":50.25,"text":"The rush of eye-poppingly enormous stock market listings from AI-flavoured companies is the most high-profile and obvious element of this revolution, as Elon Musk’s SpaceX launched on to public markets this week with fanfare that most companies can only dream of for their public debuts."}],[{"start":68.6,"text":"Big Tech rivals OpenAI and Anthropic are likely to be next, each bringing market capitalisations of a trillion dollars here, a trillion there. Alongside disgorgements of new equity by Alphabet and others, the tech giants are breaking fully two decades of shrinkage in US stock markets. "}],[{"start":87.1,"text":"New market listings, especially gigantic ones like this, are the sexy bit of generally deeply unsexy financial markets. But the deafening excitement around stock market listings is only the start, because AI has already bent the relatively nerdy corporate bond markets out of shape too, led by Amazon, Alphabet and Meta, which have more than doubled their levels of outstanding debt in the past few months to about $300bn. This is blurring long-established lines and fostering what the OECD and others have described as the “equitification” of corporate debt."}],[{"start":121.89999999999999,"text":"Richard Woolnough at M&G Investments noted in a recent blog that this “is beginning to reshape investment grade credit markets”. “Unlike equity investors, bond portfolios are typically subject to strict diversification limits,” Woolnough says. “Exposure to any single issuer is capped well below levels commonly seen in equities. This means that even highly rated issuers can struggle to find incremental buyers when supply increases sharply. In the short term, the bond market simply finds it difficult to absorb issuance at this scale.”"}],[{"start":null,"text":"
"}],[{"start":159.25,"text":"Investors are forced to recalibrate, disregard the sheer scale of new debt, which would normally make them run a mile, and treat even monster-sized borrowers as safe bets. Over time, they may have to rethink those limits, too."}],[{"start":173.65,"text":"The broader point here is that diversification is becoming increasingly tricky as the AI ecosystem gobbles up an ever-growing slice of both debt and stock markets. In theory, as AI chisels out new corporate winners and losers, it opens up a golden age for stock pickers. Wise old heads can look beyond the AI hype and focus on beaten-up, unloved, undervalued stocks. In reality, every active manager’s performance is measured against broad benchmarks, which form the basis of cheap, simple index-tracking passive investment, and which are opening their doors to huge newly listed tech names on unusually generous terms. "}],[{"start":216,"text":"Index providers, like investors, are adjusting to a new world. But the result is that increasingly, whatever the question investors are asking, the answer always ends up as “AI”. You want safety? AI. Racy growth? AI. Passive? Active? It’s always the same. And if you can’t beat ‘em join ‘em. “In this round of tech IPOs, large index funds will be compelled to buy newly listed stocks,” wrote Michael Strobaek and Clément Dumur at Lombard Odier this week. “If funds no longer price what those shares are worth, the work of judging concentration and deciding whether to own or to diversify, falls to the intelligent allocator.” "}],[{"start":256,"text":"This is true. But intelligence is no substitute for luck, and the AI machine is exerting a strong gravitational pull on investors’ funds. From talking to fund managers, I know I’m not alone in finding this unnerving. But those same investors also tell me they are ultimately paid to go with the flow."}],[{"start":274.1,"text":"Finally, AI is morphing from a corporate story, a capital expenditure splurge for the ages, to a macroeconomic driver in itself. New Federal Reserve chair Kevin Warsh believes it is on the cusp of becoming a disinflationary force that carves a path towards rate cuts. He may well be proved right in time. "}],[{"start":294,"text":"More immediately, bond investment giant Pimco wrote this week that AI investment “is now large enough to drive macroeconomic activity”, calculating that it could add about $14tn to global capital spending over the next five years — roughly equivalent to an eighth of global economic output. These are simply wild numbers."}],[{"start":315.15,"text":"Economic and corporate disruption stemming from all this could well generate periods of stomach-churning market volatility in the coming years. Equally, though, it could generate a zombie-like self-reinforcing march of investment all towards the same target. That seems to be what is happening already as we fall under the spell of our new robot overlords."}],[{"start":342.4,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1781326860_4305.mp3"}