BlackRock and Deutsche Bank CEOs rebut AI bubble concerns, saying fiscal deficits and capital competition are more pressing

October 21 - According to Bloomberg, several financial industry executives have divergent judgments on 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 major economic transformations are often accompanied by bubbles. Recently, market concerns have arisen that the massive upfront capital expenditure 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 short-term reversal in asset prices. Although individual companies may encounter setbacks, he does not believe the market is in a bubble that is bursting. He distinguished between bubbles and sustained volatility, and mentioned the impact of geopolitical tensions. He also said that if the regulatory framework is appropriate, the industrial application of AI will become Germany's opportunity of the century.

BlackRock CEO Larry Fink advocated accelerating the construction of AI data centers, warning that construction 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 said: "The faster we build more data centers, the more computing power we will have, and the faster we can reduce costs."

Steve Chiavarone, Global Equity Chief Investment Officer at Federated Hermes, believes that investors worried about an AI bubble may be right, but several years too early, because infrastructure construction still has years of growth space before the risk of overbuilding becomes more urgent. He pointed out that the market is still distinguishing which companies can obtain funding and at what interest rates, which is the opposite of what happened during bubbles.

Compared with the AI bubble, both Fink and Sewing regard fiscal deficits as a more urgent concern, especially as the AI industry is competing with governments for investment funds. The U.S. fiscal deficit is close to $2 trillion, and U.S. Treasury yields have risen to multi-decade highs. Fink said the intensity of current capital competition is the highest he has seen in his career. Regarding the rising risk of French government bonds, Sewing said it cannot yet be called a debt crisis, but it is a wake-up call for public finances, and budget discipline is crucial.