AI is reshaping the world at an unprecedented pace. But while tech stocks buoy the equity market, asset owners are still wary of making a targeted thematic play. Are they missing out on a transformational opportunity, or is the AI hype a bubble waiting to burst?

The asset owners in the latest CoreData Research On the Pulse Focus Group[1], held in January 2025, all acknowledge AI has the power to truly transform numerous industries. As AI becomes more ubiquitous across a variety of industries, disrupting the status quo, the change is delivering a vast array of investment opportunities. While asset owners are hungry to participate in this seismic shift, they are wary of being too targeted in the way they build exposure.

In this focus group, we brought together the investment officer of a US endowment fund, the CIO of a US foundation and the CIO of a defined benefit pension scheme in the UK to discuss their current sentiment towards AI investments.

Though they all acknowledge the economic opportunity arising from AI, their apprehension of investing in the technology via a targeted strategy is clear.

Allocating to an AI fund is one of a few potential routes to investing in the space. Investors can also choose to fund early-stage venture capital firms, which is high risk and promises high reward. The third way of building exposure to the AI sector is through the equity markets, which the asset owners in this discussion currently prefer.

None of the panel participants currently have a dedicated AI strategy. “We haven’t done any thematic work on AI,” says the endowment fund investment officer. This is also the case for the foundation CIO, who explains that his fund’s AI holdings are more incidental than intentional: “We are getting our exposure through public markets, and we do not have a dedicated AI theme in our strategy.”

Many asset owners hold a lot of ‘AI beta’ in their portfolios as a result of their equity investments, mainly due to the sheer dominance of the ‘Magnificent 7’ stocks in the US equity market. The UK pension fund is one such investor, getting its exposure through its investments in public equity markets. The CIO however notes that the exposures to some of the Magnificent 7 have been long-standing investments. Echoing his peers’ sentiment regarding specific AI investments, the CIO says: “We are thinking of AI as more of a strategic issue as opposed to going down the route of trying to appoint an AI manager, be it on the public side or private side.”

Challenges in AI investment

Asset owners are facing many “known unknowns” when considering AI as a thematic investment. Should they choose to do so, selecting good managers is bound to be a challenge, our panellists say. “I’m not 100% confident that most asset managers have the expertise they need to truly understand what’s going on in the AI space because it is so fast-moving,” says the foundation CIO. “What I would really want is someone with tech expertise sitting on the manager side, not someone with a finance background.” [watch this space for a follow up article on what asset owners want in an AI manager]

Another hurdle asset owners face is separating the hype from sustainable value. The pace of change in the sector makes this more of a challenge and can have a significant impact on asset values. The market crash which resulted following the emergence of DeepSeek is a prime example of this.

Although the valuations of the Magnificent 7 remain extraordinarily high, all the asset owners have exposure to these companies regardless. But is the exposure they are currently getting through broad equity markets sufficient to benefit from the AI trend or do they need to take a more direct approach? Will they miss out on significant gains if they continue to sit on the fence, or will their prudence be rewarded?

We will explore the risks asset owners are considering when assessing AI investments in the next article in this series.

Angele Spiteri​ Paris is a senior research consultant at CoreData Group, a global specialist financial services research and strategy consultancy.

To find out more about our industry insights and thought leadership research programmes, or to participate in future asset owner focus groups, you can reach her at [email protected]

[1] Would you like to participate in our next On The Pulse Focus Group ? Follow this this link and register your interest.