HSBC Survey Finds Rising Risk From Crowded AI Trades

Risks from crowded market positioning are growing as investor capital becomes increasingly concentrated in a narrow band of artificial intelligence themes, according to a new survey from HSBC. The report highlights that while overall sentiment in public and private markets is improving, this optimism is focused on a select few areas, potentially increasing market vulnerability.

Survey Highlights Concentration

The findings are from the ninth edition of HSBC's proprietary "Funding the Future Survey," which captured the views of over 200 global investors representing a combined $2.32 trillion in assets. The survey, conducted by Survation between June 19 and July 17, shows that improved sentiment and activity are "increasingly concentrated in fewer themes, fewer funds, and fewer mega-large deals," according to HSBC Data Scientist Shiva Joon.

This concentration is particularly evident in private markets. While sentiment is positive, the survey notes it is also "bifurcated." Key findings include:

• 44% of venture and private equity investors expect more activity in the next quarter.
• 64% anticipate a rise in activity over the next year.

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However, HSBC pointed out that a small number of outsized deals are driving this rebound. Stripping out the five largest U.S. venture deals in the first quarter reduces the year-to-date global deal value by more than 70%.

Public Market Optimism and AI Concerns

Public market investors were even more upbeat, with 55% expecting the recent equity rally to continue into the next quarter. The enthusiasm is largely tied to AI, where confidence in capital expenditure remains high. According to the survey, 60% of investors expect AI-related spending to increase over the next six months.

Despite the bullish outlook on spending, investors from both public and private markets share a common concern: monetization. The survey flagged that the "real test" for the AI theme will be whether its adoption translates into tangible revenue growth and margin expansion. A failure to deliver on these financial metrics could lead to significant market disappointment.