The convergence of an AI bubble and geopolitical risks pose the greatest threat to global markets, according to Nicolai Tangen, chief executive officer of Norway’s $2.1 trillion sovereign wealth fund.

The agency identified an AI bubble as a major risk scenario, potentially costing the world’s largest wealth fund 35% of its value. Geopolitical risk, including global investment restrictions and severe tariffs, could wipe out as much as 37% of the fund’s value in a worst-case scenario.

“Stability has never been so unstable,” Tangen said at a conference in Oslo. He said the biggest risk is “always the kind of things that you don’t expect, and which are not in your scenarios.”

In the short term, his biggest concerns are “inflationary pressure and supply chain issues related to the conflict in the Middle East,” Tangen said.

His comments follow warnings earlier this year about political risk, with an expert panel naming political risk in the US and concentration risk in tech companies. The fund holds over 50% of its value in the US, with Nvidia, Apple Inc, Microsoft, and Alphabet among its top investments. The fund follows an index set by Norway’s finance ministry, with some room for active management.

The fund, established in the late 1990s, invests Norway’s oil and gas revenues across global markets. It’s invested in about 7,000 companies across 60 countries, owning about 1.5% of the world’s stocks.

Written by: Heidi Taksdal Skjeseth @Bloomberg

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