Australia’s Aware Super has entered the new year with a guarded but confident view of the global artificial intelligence boom, as its newly appointed chief investment officer, Simon Warner, flags emerging fragilities in the way some AI ventures are now being financed.
Warner, who took over leadership of the A$210 billion fund’s investment team last week, said the AI sector’s economic model is shaping up to be the defining financial market risk of 2026, even as earnings growth from the dominant players continues to justify steep valuations.
Warner told Reuters that the extraordinary rise in AI infrastructure spending — from data centers to large language models — had until recently been underwritten by the most stable source available in capital markets: retained earnings from companies with long track records of profitability. That created a sense of comfort for institutional investors who viewed the boom as self-funded rather than debt-driven or reliant on speculative capital.
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He noted that the tone has shifted. Over the past six months, a trickle of more exotic financing structures has begun to appear, raising concerns about how some companies are bankrolling their AI expansions. Warner described these new arrangements as “circular financing” and “conduit financing,” mechanisms that move money through more complex channels rather than straight from a company’s balance sheet. In his words, “nothing red, but definitely orange,” signaling caution without alarm.
The shift comes at a time when AI-driven stock gains have become a major force in global markets. The Magnificent Seven — Microsoft, Apple, Alphabet, Nvidia, Meta, Amazon, and Tesla — have carried a significant share of U.S. equity performance, helping buoy investor wealth and household demand. Warner said that the relationship between tech valuations, capital expenditure, and the broader U.S. economy has created a delicate interdependence. If even one of those pillars falters, he warned, financial markets could quickly feel the shock.
The urge to scale up AI capacity has led to unprecedented spending across the industry. Meta disclosed in October that it secured a $27 billion financing deal from Blue Owl Capital for what will be its largest data center project globally. The company has been racing to expand its generative AI capabilities, which require enormous power, cooling, and real estate footprints. For many analysts, that financing arrangement underscored how the sector’s capital needs have grown beyond what routine cash flow can comfortably support.
Microsoft, which remains Aware Super’s second-largest listed holding in its balanced fund, has also been pouring billions into new data center clusters and advanced chips to support its partnership with OpenAI. Alongside Microsoft, Aware holds stakes in Nvidia, Apple, Alphabet, and Meta, giving Warner a direct view into how the world’s most influential companies are navigating the cost of staying ahead in AI.
Even with the “orange lights” flashing, Warner said the earnings trajectory of these firms still validates their lofty valuations, though he acknowledged that fatigue in capital expenditure could eventually threaten those valuations. He suggested that investors who have been wary of how long the spending boom can last are right to stay vigilant.
The concern is not about an imminent downturn but about whether the current pace of investment can be sustained without creating vulnerabilities. A significant pullback in spending by any of the big technology names could ripple through markets, tightening liquidity and altering the wealth effects that have propped up U.S. consumer sentiment. Warner described this possibility as a dynamic worth watching closely.
For global funds like Aware Super, the AI sector remains both an engine of returns and a source of latent risk — a combination that demands deep scrutiny as the industry moves into a more mature, capital-intensive phase. Warner’s early remarks as CIO position him as someone determined to track the fine print beneath the sector’s explosive growth, wary of the structures now emerging around what has become the world’s most expensive technological race.