Norges Bank CEO Warns of AI Bubble Risks Amid Record Fund Returns

Nicolai Tangen, CEO of Norges Bank Investment Management, has voiced significant concerns regarding the potential risks associated with inflated valuations in the artificial intelligence sector, even as the Government Pension Fund Global reported a remarkable 9.4% return in the first half of 2026, marking the best half-year performance in its history.

During an interview with Bloomberg, Tangen highlighted that while the fund's equity portfolio gained 13.0%, driven largely by Asian technology stocks, he remains cautious about forward-looking risks including the possibility of an AI bubble. He indicated that a severe correction in the AI market could result in a staggering 35% decline in the fund's total value, which would equate to losses exceeding $770 billion.

Tangen's apprehensions extend beyond AI valuations. He also pointed to persistent inflationary pressures exacerbated by tariffs and ongoing geopolitical conflicts as significant threats to global markets. He noted that a major geopolitical upheaval could lead to an even more severe 37% drawdown, surpassing the losses experienced during previous crises such as the 2008 financial downturn.

Despite these concerns, Tangen acknowledged that AI and robotics could potentially drive productivity gains and create a deflationary environment within the next three years, as evidenced by a 20% productivity increase within the fund itself due to AI integration in trading and analysis functions. This duality of record returns coupled with caution reflects the complex landscape institutional investors must navigate.