After A Record Year, Temasek’s Bigger AI Bet Meets A World Still Writing The Rules

Temasek Holdings, Singapore’s state investment company, reported a net portfolio value of S$518 Bn (US$401 Bn) for the year ended March 31, 2026, up S$49 Bn from the previous financial year. It also set a more ambitious AI target, saying artificial intelligence should account for 10% to 15% of the portfolio by 2031, up from 6% currently.

The target came with the kind of admission that institutions rarely make when increasing exposure to a crowded trade. Chia Song Hwee, chief executive of Temasek Global Investments, told reporters that overvaluation in AI is “unavoidable”, and that nobody, Temasek included, can predict when a correction will come.

That is the tension inside Temasek’s record year. The fund is raising its AI bet while conceding that the market is already priced for excess. The record portfolio value is the obvious headline. The more important question is what Temasek is building around the AI allocation, because the state investor is not relying on that bet alone.

During the year, Temasek invested S$51 Bn and divested S$31 Bn, resulting in net investments of S$20 Bn, which it describes as disciplined capital recycling: selling mature positions and redeploying proceeds into areas where it sees stronger potential.

Its three portfolio segments — Singapore-based Temasek Portfolio Companies, Global Direct Investments, and Partnerships, Funds and Asset Management Companies — closed the year at 43%, 38% and 19% of portfolio value, respectively, a mix that has held broadly steady since 2018. Each has delivered a 10-year internal rate of return of between 7.6% and 8.1%, the kind of steadiness Temasek points to when arguing that one year’s number should not be read in isolation.

The Shape of the AI Bet

Temasek’s AI target comes with an important qualifier. Its 10% to 15% range specifically excludes AI exposure already embedded in its Singapore-based portfolio companies — meaning the disclosed number is a floor, not a ceiling. It does not capture the extent to which those companies may already carry AI exposure through their own operations, customers, suppliers or technology spending.

Its allocation spans five focus areas, including energy and data centres, semiconductors, cloud service providers, foundation models and AI applications and software infrastructure. A sixth category, which Temasek calls vertically integrated mega-caps, covers companies with a foothold in more than one area at once.

Temasek’s disclosures also name a broad AI book: foundation-model developers Anthropic, OpenAI and xAI (the last has since merged with SpaceX) alongside SpaceX itself. There are expanded stakes in semiconductor companies, including Nvidia, ASML and Broadcom, as well as a new investment in Lam Research.

Further down the value chain, Temasek has backed CuspAI and PhysicsX, which apply AI to materials science and engineering simulation, respectively. Alongside Warburg Pincus, it also invested in Park Place Technologies, a data-centre hardware maintenance business tied to the broader AI infrastructure build-out.

Nikkei Asia has separately reported Temasek positions in the South Korean memory-chip makers SK Hynix and Samsung Electronics. Both, Nikkei reported, have helped drive South Korea’s stock market higher this year but also added volatility amid short-term swings in investor sentiment.

Temasek’s chief investment officer, Rohit Sipahimalani, has said that the fund weighs every investment, AI included, against its proximity to geopolitical flashpoints before deciding whether to proceed.

The Safety Net beneath the AI Boom

The hedge against that AI ambition is already visible elsewhere in the portfolio.

Private credit sits at 2% of the portfolio today, a base that has grown more than sixfold over the past decade, with a target of 5% by 2031. This is managed through Aranda Principal Strategies, the platform that Temasek created in 2024 by consolidating its credit activity, with an initial S$10 Bn portfolio.

Aranda has since surpassed S$13 Bn and now generates more than S$1 Bn in annual recurring income. The strategy leans on senior secured structures, including corporate lending, asset-backed financing and real estate credit, chosen for the downside protection and recurring cash yield that an AI equity position does not offer.

Core-plus infrastructure, spanning renewable and nuclear energy, energy storage and grid modernisation, stood at approximately S$7.0 Bn, or 1% of the portfolio, as of March 31, 2026, with the same 5% target by 2031.

But that caution is not limited to where Temasek allocates fresh capital. It also shows up in what it chooses to sell. Since 2020, Temasek backed the build-out of Temasek’s data centre platform, STT GDC, helping it expand across Asia. In 2026, ST Telemedia sold its remaining 82% stake in the platform to KKR, the US private equity firm, and Singapore Telecommunications (Singtel), for S$6.6 Bn — one of the largest digital infrastructure deals in Southeast Asia this cycle.

Energy and data centres are among the five areas Temasek has named for fresh AI capital. Yet the same year it is scaling into that category, a business it backed was sold out of the portfolio. Temasek has not addressed this specific overlap directly; it describes divestments like this one as capital recycling, freeing proceeds for earlier-stage opportunity. What the deal shows, regardless of Temasek’s framing, is that the AI push is not a simple accumulation. Temasek is exiting positions within the very categories it is also buying into.

The Cost of Mistiming a Market

The strategy does not fully insulate Temasek from the risk of backing a theme too early or too heavily. Its own return record shows the cost.

Temasek’s five-year total shareholder return — a compounded measure of dividends plus portfolio value growth — was 4.6% in Singapore dollar terms, weighed down by headwinds in China’s capital markets between 2021 and 2024. The longer record looks steadier, with 10-year and 20-year returns of 7.1% and 6.8%. Still, the China drag is the clearest reminder of what an existing allocation looks like when it runs into a multi-year downturn.

Could that mistiming happen with AI as well? That China precedent suggests the AI allocation needs to be judged against the enthusiasm now priced into the trade.

Temasek’s Total Shareholder Return By Horizon

Horizon	S$ TSR	US$ TSR
20-year	6.8%	8.0%
10-year	7.1%	7.5%
5-year	4.6%	5.4%
1-year	10.5%	14.8%

Note: Total shareholder return, annualised, as of March 31, 2026. 
Source: Temasek Review 2026

That concern is not Temasek’s alone.

A U.S. Treasury draft, first reported by NOTUS, warned that an AI-driven downturn could ripple through stock markets, cloud providers, chipmakers, utilities and the lenders financing data-centre construction. The draft’s analysts argued that AI firms are more deeply embedded in the broader U.S. economy than dot-com companies were 25 years ago. Treasury has since publicly distanced itself from the draft, calling its findings unvetted and not representative of the department’s position.

A separate signal came from the Federal Reserve’s May financial stability report — not the Fed’s own institutional view, but a survey of roughly 20 market participants that New York Fed staff consulted. The Fed’s report states plainly that the survey captures what those participants think, not what the Federal Reserve itself believes.Half of those surveyed cited AI as a possible shock to financial stability, up from 30% in the previous survey. But AI ranked behind geopolitical risk and an oil shock as a concern.

Respondents flagged AI-linked equity valuations, debt-funded capital spending, and the possibility that AI adoption could weaken the labour market. On private credit specifically, they pointed to redemption pressure and AI-driven risk to borrower credit quality — even as the Fed’s own report, separately, called current redemption risk in that market “manageable”.

Neither document is about Temasek. But both point to mechanisms that sit close to where Temasek’s own book is now scaling. And its record portfolio value comes with that caveat attached.

This is also the year Temasek completed its move to full mark-to-market reporting — valuing unlisted holdings at current market prices rather than at accumulated book cost — after four years of partial transition. On the prior book-value basis, net portfolio value stood at S$486 Bn, up S$52 Bn, a larger increase in absolute terms than the S$49 Bn headline figure, which is measured on the newly adopted mark-to-market basis. The premium the mark-to-market valuation carries over book value narrowed slightly in FY26 to S$32 Bn from S$35 Bn in the previous fiscal year. That argues against the record number being inflated by the accounting change. If anything, the opposite reading is closer to the truth.

India And China: Two Different Fault Lines

The geographic mix also shows how far Temasek has globalised its portfolio. Singapore remained its largest single market, accounting for 27% of underlying exposure, but the Americas were close behind at 26%. China stood at 17%, Europe, the Middle East and Africa at 12%, the rest of Asia Pacific, excluding Singapore, China and India, at 11% and India at 7%.

Temasek’s Market Portfolio

Market	Portfolio Share	Approach	Playbook
Singapore	27%	Core home market; anchors the TPC segment	Not sector-specified; framed around active stewardship of its Temasek Portfolio Companies (TPC)
Americas	26%	Largest single destination within Global Direct Investments	Financial services and technology lead, spanning payments, asset management and the AI value chain.
China	17%	Significant, long-term investment destination	Financial services, consumer technology and life sciences, anchored by holdings such as Alibaba, Tencent and biotech leaders
Europe, Middle East and Africa	12%	Constructive on long-term prospects despite near-term stagflation pressure	Financial services the largest sector, followed by consumer, with holdings such as Adyen and Ermenegildo Zegna
Asia Pacific excluding Singapore, China and India	11%	Selective; opportunistic within the region	Technology, consumer and healthcare; partnering local champions and private equity in Japan and South Korea
India	7%	Key long-term market despite near-term equity volatility	Financial services and industrials lead, with technology and healthcare; Schneider Electric India* was the anchor holding.

*Schneider Electric India was the anchor of Temasek’s India industrials portfolio during its holding period; Temasek completed the sale of this stake to Schneider Electric for S$8.2 Bn in 2025.

India adds a different complication to Temasek’s AI story. Unlike the US or South Korea, where the AI trade has lifted chipmakers, cloud companies and other hardware-linked stocks, India has not been a direct beneficiary of that re-rating to the same extent. For Temasek, the country remains a long-term growth market, driven by consumption, financial services, healthcare and industrialisation rather than by the AI infrastructure boom itself.

There is also a second-order risk. Temasek is increasing exposure to AI applications and software infrastructure globally, but India’s services-heavy economy is among the markets where AI-driven automation could eventually test employment models and workforce readiness. That does not weaken Temasek’s India thesis, but it makes the country a more complicated part of the portfolio: less exposed to the immediate AI market rally, yet more exposed to the labour-market questions that AI will raise over time.

Dilhan Pillay Sandrasegara, Temasek‘s chief executive officer, said India has performed well for the fund over time, although the past year was challenging due to exchange-rate volatility.

That 7% headline figure also undersells Temasek’s actual footprint in the country. The most visible move was its 2025 agreement to sell its 35% stake in Schneider Electric India to Schneider Electric for €5.5 Bn (S$8.2 Bn), giving the French group full ownership of the Indian business. Temasek still lists Schneider Electric SE among its listed holdings, making the transaction a repositioning of its India exposure rather than a withdrawal from energy management and automation.

The India link also runs through Temasek’s Singapore-based portfolio companies. Singapore Airlines, in which Temasek holds 50%, owns 25.1% of Air India after the completion of Air India’s merger with Vistara in 2024. DBS Group Holdings, Temasek’s largest single-name holding, operates DBS Bank India as a locally incorporated subsidiary. Singtel, another top holding, has been a Bharti Airtel shareholder since 2000, although it has been trimming its stake as part of a broader capital-recycling programme.

China tells the other side of the portfolio story. Temasek’s market exposure stands at 17%, down from 24% a decade ago, even though the underlying value rose by S$10 Bn over the past year and by S$24 Bn over 10 years. The shift is not an exit. It is a reset in how the fund reads China: less as a broad, high-growth consumption market and more as a maturing economy where new capital must be allocated selectively to biotech, robotics, AI-linked hardware and the energy transition. Temasek’s own assessment of domestic consumption remains cautious; it calls the recovery uneven.

The fund has also redrawn its operating map. Since April 2026, Temasek has worked through three wholly owned entities: Temasek Singapore, Temasek Global Investments and Temasek Partnership Solutions. Temasek International continues to house group and corporate functions. The structure gives cleaner lines to what the portfolio has already become — a Singapore base, a global direct-investment arm and a wider platform for funds, partnerships and asset-management strategies. Temasek calls the arrangement OneTemasek.

None of these weakens Temasek’s AI ambitions. It only makes the target conditional. The fund is raising exposure to a theme it sees as durable, but it is doing so in a market where even its own executives have acknowledged the risk of excess pricing. Today, the ballast intended to absorb a correction remains small. Private credit and core-plus infrastructure together account for about 3% of Temasek’s portfolio, against an AI allocation already twice that size. By 2031, those stabilising assets are expected to reach 10% — matching the low end of Temasek’s AI target, but still short of the high end of 15%. The stabilising cushion may end up smaller than the bet it needs to offset.

That is the unresolved question inside Temasek’s record year. The fund is not simply chasing AI. It is trying to own the machinery around it, from chips and cloud capacity to data centres, power systems and credit structures. Temasek has the scale, liquidity and mandate to stay invested through volatility. What is not yet clear is whether that is enough — whether regulation, energy scarcity, geopolitical limits or social resistance could reshape the AI market faster than Temasek’s counterweights can grow to absorb the shock.