Who pays the bill?

How long can the extraordinary pace of AI investment and the relentless accumulation of sovereign debt continue? These are our central themes for 2027.

Despite legitimate scepticism, AI’s strategic importance and the risks of falling behind suggest the investment cycle is not about to stop. But technological success does not guarantee financial success, and the road ahead is likely to be bumpy. 

Such a resource-intensive build-out is bound to face pushback, at a time when conflicts have reminded us how scarce resources can be. And as history shows, some misallocation of capital is almost inevitable in an investment wave of this scale. 

While global finance focuses almost exclusively on the West, Chinese competition could accelerate innovation and adoption, while putting pressure on the pricing power and profitability of leading US AI labs.

The promise of higher productivity will be an important tailwind for companies, but also a challenge for employment, and job data could start to deteriorate sooner than expected. Creative destruction may once again make the headlines, putting immense pressure on governments.

Nor will the spiral of sovereign debt and deficit be easily stopped. Can, and will, countries with large deficits, like the United States or France, do what is needed to break this vicious circle? Beyond major elections in many important countries, the debate on whether to spend less or tax more in highly polarised societies will reach a peak next year. Whichever path governments choose, reducing deficits may be essential in the long term, but it could weigh heavily on economies and markets in the short term.

This phenomenon sits alongside further polarisation of world affairs, shaped by major unresolved conflicts and the consolidation of new alliances and spheres of influence. All this will have an impact on world trade, economies and financial markets. 

As we prepare for another stormy year, I wish you a good read.

Ricardo Castillo, Head of Investments