Temasek targets big jump in AI investments as value of portfolio hits record high

Singapore state investor Temasek said on Wednesday it was targeting a major increase in investments in AI companies, aiming to lift its exposure to the technology to as much as 15% over the next five years from 6% now.

Temasek, which owns stakes in Anthropic and OpenAI, also said its net portfolio value climbed to S$518 billion ($400 billion) last financial year, marking the second consecutive year that ‌it has hit ⁠a record.

That ⁠represented growth of 10.5% in Singapore dollar terms or 14.8% in U.S. dollar terms. The return compares with a 17% rise for MSCI's world stocks gauge, though Temasek's portfolio differs from ​public equity benchmarks in structure, mandate and asset mix.


'Rubber hits road in AI adoption'

Chief Executive Dilhan Pillay told a briefing that AI's rapid advancement represented "a pivotal phase ​that will create vast new opportunities."

He added that Temasek intended to deploy capital across five focus areas: energy and data centres, semiconductors, cloud service providers, foundation models and AI applications and software infrastructure.

Temasek would also be looking at its entire holdings through the lens of AI, he said.

"The rubber hits ​the road in AI adoption," he said. "The remaining 85% of our portfolio must be focused ⁠on AI adoption for ‌competitiveness. That is where the rest of our portfolio will see value capture."

Temasek said its results last year ​were helped by gains ​from divestments and the performance of local companies. It declined to disclose its stakes in AI companies and how ⁠those might have affected its performance.

While AI-related companies have seen huge surges in valuations, Temasek said ​it has also had to contend with an uneven Chinese economy and war in the Middle ​East, which set off market swings that pulled down its portfolio value by 2% in the final month of the financial year.

"This is one of the most challenging environments that we have had to navigate as investors," Pillay said.

Private credit also in focus

On a longer-term basis, Temasek logged an annualised 10-year return of 7.1% and a 20-year return of 6.8%.

Its five-year return of 4.6% was dragged down by China lagging global markets from 2021 to 2024. Temasek said China valuations have since rebounded and its underlying China exposure rose by S$10 billion over the year.

As part of ‌efforts to offset the AI-driven part of its portfolio, which it described as high-growth but volatile, Temasek said it was also planning to increase its exposure to more stable areas such as private credit and what it calls "core-plus" infrastructure.

It aims ​to lift exposure ​to private credit to 5% by 2031 from ⁠2% with a focus on senior secured debt. That plan comes despite the industry entering a more cautious phase, as managers contend with softer fundraising, elevated redemption requests and closer scrutiny of loan quality.

It plans to expand exposure to core-plus infrastructure - infrastructure that relates to areas such as ​electrification, data centres and energy transition - to 5% by 2031 from 1%.

In the last financial year, Temasek invested S$51 billion and divested S$31 billion of assets, resulting in net investments of S$20 billion.

This included investments in Anthropic and OpenAI, China's Luckin Coffee and Europe's Ermenegildo Zegna Group.

Temasek said 43% of its portfolio was in Singapore-based portfolio companies, 38% in global direct investments and 19% in partnerships, funds and asset management companies.

Its three units delivered broadly similar 10-year internal rates of return, with Temasek Singapore's portfolio companies at 8.1%, global direct investments at 7.6% and partnerships, funds and asset management companies at 7.7%.