The CEO of Norway's Government Pension Fund Global has warned that an AI-driven market collapse could cause significant losses to its $2.4 trillion portfolio.

Nicolai Tangen, CEO of Norway's Government Pension Fund Global (GPFG), has warned that an extreme market collapse driven by artificial intelligence investments could result in a massive loss for the fund. The world's largest sovereign wealth fund, which manages $2.4 trillion, recently reported a record profit of 1,753 billion Norwegian kroner for the first half of the year. Tangen cautioned that the current AI-chip trade poses a serious risk to the wealth accumulated over the past three decades.

Investment Strategy and Exposure

Norway's fund follows a benchmark-based strategy, with technology accounting for roughly one-third of its stock investments. Unlike other sovereign wealth funds that invest heavily in private equity or real estate, Norway maintains a portfolio of approximately 70% equities and 30% bonds. Experts note that the fund has limited ability to deviate from its index or hold large amounts of cash due to a strict government mandate.

Potential Impact of a Market Correction

Norges Bank Investment Management has conducted stress tests regarding an AI-driven market correction. Estimates suggest such a scenario could reduce the fund's total value by approximately 18%, which would equate to roughly €432 billion. This potential loss is equivalent to nearly seven years of Norway's energy revenues, which are projected to reach €63 billion in 2026.