Temasek, Singapore's sovereign wealth fund, plans to more than double its investment allocation to artificial intelligence (AI) companies over the next five years. The fund is sweepingly reshaping its investment strategy around AI to lift returns that have lagged the global stock market rally in recent years.
Temasek said its total shareholder return (TSR) for fiscal year 2026 came in at 10.5%, the Financial Times (FT) reported on the 8th. That is 1.4 percentage points lower than the previous year's 11.9%. Notably, its annualized return over the past five years stood at just 4.6%, far below the 9.9% annualized return of the MSCI World Index, the global equity benchmark, over the same period.
To boost returns, Temasek has decided to put more weight on AI investments. The fund plans to expand AI's share of its total portfolio from the current 6% to 15% by 2031. "AI is a core driver that not only uncovers new investment opportunities and optimizes our portfolio, but also leads the institution's sustained growth," said Dilhan Pillay, Temasek's chief executive officer.
Its main investment targets will be concentrated in five areas: energy and data centers, semiconductors, cloud service providers, AI model developers such as OpenAI and Anthropic, and AI software infrastructure. New investments will be directed primarily at listed companies rather than private ones, and as the AI asset allocation expands, existing investments in technology and telecommunications companies will be gradually reduced. Bloomberg described the move as "a decision that shows global institutional investors still view AI as the most promising investment destination, despite concerns that the AI investment frenzy has entered an overheated phase."
Temasek has already shown strong interest in the AI sector in the market. Its major holdings include Nvidia, Amazon, Tencent, and Alibaba, and this year it participated in OpenAI's $122 billion fundraising and Anthropic's $65 billion investment round. With both companies pursuing large initial public offerings (IPOs), expectations for future investment returns are also growing.
Alongside AI, Temasek plans to expand its private credit investments. The fund intends to raise private credit's share of its total portfolio from the current 2% to 5% by 2031. While retail investors have been pulling money out of the private credit market following a string of failures at large companies, the move is seen as aligned with a trend of institutional investors expanding their allocations instead. Temasek is interpreted as judging private credit to be an asset class that carries lower risk than private equity while offering returns comparable to equities.
In its regional investment strategy, the fund's weighting toward the United States is also expected to grow further. Temasek's Americas assets account for 26% of its total portfolio, more than doubling from about 11% in 2016. Its China allocation, meanwhile, edged up to 17% but still falls short of its level a decade ago (24%). "The AI, core infrastructure, and private credit investment opportunities we are currently focused on are distributed around the world, but a significant portion is concentrated in the United States," said Rohit Sipahimalani, chief investment officer of Temasek International. "We expect our U.S. investment allocation to expand somewhat further from current levels."
