Sovereign investors are reassessing portfolio construction as they seek exposure to AI without overreliance on mega-cap tech stocks, amid shifting geopolitical and market risks, according to an Invesco survey.
Artificial intelligence sits at the centre of a growing tension for sovereign investors, who are undertaking a broad reassessment of portfolio construction while simultaneously deploying the technology within their own investment processes.
Sovereign investors managing approximately US$29 trillion ($42 trillion) view AI as a structural shift, yet 52 per cent cite market concentration as the primary portfolio risk of AI-related investments.
“Conviction in [AI’s] structural importance is high, with 77 per cent regarding it as a transformative technology with significant multi-decade growth implications. Yet translating that conviction into portfolio exposure is proving complex,” the 14th annual Invesco global sovereign asset management study said.
As the AI opportunity extends beyond software into physical infrastructure, energy systems and national industrial capability, the report highlights how concentration risk remains central. Investors are grappling with how to gain exposure without becoming overly reliant on a narrow group of large-cap technology companies.
Managing director and head of Australia and New Zealand, Jonathon Crook, said AI represents both a compelling structural opportunity and a source of concentration risk, energy infrastructure strain and geopolitical dependency.
“As the build-out accelerates, infrastructure and productivity enablement are emerging as more durable routes to exposure, driving demand for power and data assets that can be captured at scale,” Crook said, adding that how to invest in AI is also distinct from how to use it.
“Internal deployment remains at an earlier and more varied stage, with secure implementation and confidentiality shaping how and where institutions adopt the technology.”
On geography, the United States is seen by a majority (75 per cent) as best positioned to lead AI development and adoption, while China ranks second at 16 per cent of respondents.
Some sovereigns, however, question whether US leadership will remain unchallenged, pointing to China’s long-term industrial strategy and deep talent pipeline. China’s approach to AI infrastructure – focused on broad adoption and cost efficiency – was also viewed as strategically significant, not just for model development but for system-wide deployment.
AI adoption within sovereign institutions is also accelerating with the study finding 69 per cent are now using AI in their investment process, up from 33 per cent in 2024.
The most common application is research and information synthesis, followed by operational efficiency, idea generation and decision support.
The findings point to a broader shift in how central banks and sovereign wealth funds balance resilience, returns and diversification in an increasingly complex investment environment.
The study, which surveyed 144 institutions (90 sovereign wealth funds and 54 central banks), highlights how geopolitical uncertainty is reshaping portfolio strategy at speed.
As geopolitical shocks and shifting correlations challenge long-standing frameworks, sovereign investors are redesigning portfolios to withstand a wider range of scenarios.
In this environment, 71 per cent of central banks and 54 per cent of sovereign wealth funds agree that resilience considerations are becoming as important as return in portfolio design.
Capital is increasingly being directed toward assets that combine resilience and return. According to Invesco, energy security and energy transition infrastructure are viewed as the most credible resilience theme by 80 per cent of sovereign investors, reinforced by AI-driven demand for power and data infrastructure.
Crook added that recent years have reinforced the persistence of external shocks in the investment landscape.
“What’s changing is how portfolios are being built in response. Resilience is now central to portfolio construction and is increasingly viewed alongside return as a core objective. The focus is shifting toward more diversified and adaptable exposures that can withstand a broader range of outcomes, while still delivering on long-term objectives,” he said.
In a less supportive global environment, long-term investing is becoming more valuable but harder to sustain in practice, with 39 per cent of sovereign wealth funds finding their actual investment horizon falls short of their stated one.
Capital is also rotating away from concentrated listed equity exposures. Among sovereign wealth funds, 65 per cent identify private markets as a key return driver, with infrastructure the fastest-growing alternative asset class over the past five years.
Invesco said infrastructure programmes are increasingly shaped by decarbonisation, renewable energy, digital infrastructure and data centres, all of which are seen as supporting both productivity and long-term economic development across regions.
Meanwhile, demand for flexibility, liquidity and implementation efficiency is driving growth in global ETF adoption.
Although sovereign investors have not historically been major ETF drivers, 39 per cent of respondents now use them.
Passive ETFs remain dominant, while thematic ETFs are gaining traction. Commodity ETFs are also serving a specific role for central banks, particularly in providing efficient gold exposure without the operational burden of holding physical bullion. Active ETFs remain early-stage, with 7 per cent of sovereign wealth funds already allocating and a further 26 per cent considering it.
More broadly, central banks are undergoing a structural shift in reserve management driven by inflation, geopolitical fragmentation and changing market conditions.
Allocations are gradually moving into equities, corporate debt and inflation-linked securities as reserve managers look beyond traditional fixed income.
While dollar diversification is underway, the report notes it remains constrained by the lack of a credible large-scale alternative.
More than a third of central banks expect to increase gold allocations over the next three years, reinforcing the metal’s continued role as a cornerstone of reserve strategies.
