Large Funds Eye 'Bitcoin (BTC)' as AI Fears Erupt

▲ Artificial Intelligence (AI), stock price decline, bubble collapse/AI generated image

As the artificial intelligence (AI) craze permeates the stock market, large pension funds and sovereign wealth funds, facing an urgent need for portfolio diversification, are eyeing Bitcoin (Bitcoin, BTC) as a new means of risk dispersion. As the concentration of AI-related sectors emerges as a systemic risk for the entire market, there is a growing possibility of capital moving to Bitcoin, which has a low correlation with traditional financial assets.

Bitcoin.com analyzed on September 22 (local time) that giant asset managers have begun to conclude that traditional industry-specific diversified investment methods are no longer effective. Monte Tarbox, Chief Investment Officer (CIO) of the New York City Retirement Systems, which manages $326 billion in assets, stated in an interview with Bloomberg that "for someone in my position, this is a really scary time in many respects," and revealed that even private equity funds with proven performance were rejected for investment due to excessively high AI exposure. This is because pension funds, responsible for the retirement savings of hundreds of millions of people, must avoid a structural crisis where the entire market is simultaneously shocked when the AI bubble bursts.

In fact, AI concentration in the market has reached a serious level. Goldman Sachs estimated that AI-related investments would drive approximately 40% of the earnings growth for S&P 500 companies this year. In a survey conducted by Invesco targeting 90 global sovereign wealth funds, 'market concentration' was identified as the biggest risk factor related to AI investment. Consequently, large institutions are adopting a Total Portfolio Approach (TPA) to re-evaluate individual asset classes from an overall portfolio perspective, and a movement to incorporate Bitcoin as an alternative to offset AI risk is being detected. Even if the New York City Retirement Systems allocates only 1% of its total assets to Bitcoin, it would result in an inflow of $3.26 billion in buying capital.

Bitcoin's recent price trend also supports its attractiveness for institutional diversification. When calls to curb the development of high-performance AI models emerged, leading to a decline in stock futures indices, Bitcoin actually saw an upward trend. According to JP Morgan, when global hedge funds recorded approximately a 3% loss due to a sharp drop in tech stocks last July, Bitcoin rebounded by 7%. In the past month, while the Nasdaq 100 index rose 3% and the S&P 500 index remained flat, Bitcoin surged over 12%, testing the $86,000 mark.

However, the instability of its correlation with the stock market at different times remains a challenge. In February, when tech stocks faced a sell-off due to concerns about AI-driven industrial disruption, Bitcoin also experienced a sharp decline. In the event of macroeconomic headwinds such as high inflation and high interest rates, it could face downward pressure simultaneously with the stock market, and it also faces technological challenges such as the quantum computing speed race driven by AI development. Nevertheless, its long-term price appreciation trajectory over 18 years and its increasing institutional adoption are being evaluated as attractive diversification alternatives for institutional investors seeking to break free from AI dependence.

[Article Key Summary]

-As AI concentration makes diversification in traditional assets difficult, large funds are considering Bitcoin (BTC) as an alternative hedging tool.

-Goldman Sachs analyzed that 40% of S&P 500 earnings growth is concentrated in AI, and the New York City Retirement Systems refused investment in funds with excessive AI exposure.

-Bitcoin has shown upward reversals during tech stock downturns, increasing expectations for a 1% inflow of institutional funds.

*Disclaimer: This article is for investment reference only, and we are not responsible for investment losses based on it. The content should be interpreted for informational purposes only.*