(Oct 12): The market is repricing the risks around investments related to the buildup of artificial intelligence that could lead to more discipline in financing, according to DBS Group Holdings Ltd chief executive officer Tan Su Shan.

“The market has spoken,” Tan said in an interview with Bloomberg Television on Monday. “It’s not a bad thing because now, people are asking for higher returns, and people are also looking at structures. They’re making sure that whatever money is now being hoovered into the whole AI capex ecosystem will lead to some kind of long-term ROI that can then be repaid back to debt or bond or equity holders.”

Tan, who leads Southeast Asia’s biggest lender, said weaker firms may see their credit ratings revised downwards, though this risk repricing is “healthy” as the market wants to make sure that big financial commitments are sustainable.

Her comments come as technology giants spend billions on AI, and as market gains concentrate in a handful of stocks. Interest rates are rising and bond yields around the world have surged to the highest in decades, increasing the cost of funding the enormous investment needed to build AI infrastructure. PricewaterhouseCoopers LLP estimates Asia’s spending on data centres could reach US$8.2 trillion (RM33.5 trillion) by 2050.

DBS has originated about S$25 billion of AI deals this year, often as lead manager on syndicated loans and has held only a fraction of that, Tan said. The financing is mostly for hardware, from semiconductors and memory chips to data centres, she added.

Tan was speaking on the sidelines of DBS’ conference that focuses on key topics like AI and geopolitics, and features speakers including TikTok Inc’s CEO Shou Chew, Intel Corp’s CEO Lip-Bu Tan and Broadcom Inc’s CEO Hock Tan. In her opening comments, Tan said she hasn’t seen this kind of volatility in interest rates for a long time, with equity investors whipsawed by swings in AI stocks. 

Tan also said conflicts in the Middle East and involving Russia were escalating at a pace that has become worrying. “Frankly, I find it exhausting just to look at so much tension and so much stress in the system,” she said.

Tan has made AI key to her strategy since taking the helm in March last year. The Singapore-based bank is starting to see results from large AI projects that are underway to overhaul its work flows and proccesses, and these include fee growth and new accounts being opened at a faster pace, she said.

Meanwhile, Tan also said the wealth management business has long term structural tailwinds as Asia creates more wealth, the capital markets deepen and intergenerational wealth transfer happens. While market swings will affect flows in the short term, net new money growth has been “consistently strong,” she added.

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