Future Fund looks beyond AI winners to hedge risk

The Future Fund is hedging its artificial intelligence (AI) investment risks by spreading exposure across the value chain and with investments across asset classes, including infrastructure, venture capital, private equity and listed equities.

It is investing into frontier model developers, power generation, hyperscale infrastructure, broad-based adopters, digital networks, grid expansion, applications and software, semiconductor manufacturing and cyber resilience.

"It isn't about chasing every AI narrative or over allocating to fashionable - and expensive - assets. Some of the most important assets sit one step removed from headlines," Future Fund chief executive Raphael Arndt said.

"This includes transmission infrastructure to support data centre demand, electricity grid modernisation, advanced manufacturing and other tools and services tied to productivity, sovereign capability and digital infrastructure."

For a sovereign wealth fund, Arndt added, the challenge is not deciding whether AI matters, it is rather how to build a portfolio resilient enough to capture AI's opportunities when no one can forecast how every part of the complex landscape will evolve.

"That makes this less a contest to identify individual winners than a discipline of building resilient exposure. The probability of accurately picking the company, country or technology stack that will dominate - and generate reasonable returns from already high valuations - is exceptionally low," Arndt said.

"The pace of iteration is rapid, the field is crowded, and regulatory settings are changing and uneven. Governments will regulate AI through the lenses of national security, competition and domestic politics, making precise predictions even harder."

To tackle this, Future Fund is focused on building diversified and resilient portfolios.

"Diversification is not a new idea, but AI requires greater granularity. Resilience means avoiding excessive exposure to any single company, asset, model or sub-theme," Arndt said.

"Countries that fall behind will face more than slower growth. Weak domestic AI capability risks diminished industrial competitiveness, reduced strategic autonomy and growing dependence on external providers for critical systems - from healthcare to defence to financial services. In that context, dependence becomes a geopolitical vulnerability."