Not another dotcom bubble: DBS CIO doubles down on AI, healthcare

[SINGAPORE] The so-called “artificial intelligence (AI) bubble”, which has some concerned, is not the same as the 2000’s “dotcom bubble”, said DBS’ chief investment officer (CIO) Hou Wey Fook.

“The noise is getting louder by the day around the artificial intelligence (industry) becoming a bubble, and many have highlighted similarities with the dotcom era,” he said during the lender’s chief investment office media briefing on Monday (Jan 12).

However, the CIO is confident that the optimism in the AI sector is based on sound fundamentals.

Unlike in the dotcom era, the capital expenditure of large tech companies today – such as Microsoft, Google, Meta and Amazon – are financed by operating cash flows, and not from them incurring massive debt.

“The crash during the dotcom bubble was entirely due to exuberant expectation of earnings growth, which did not materialise,” he said, pointing to an 88 per cent collapse in earnings growth during that period.

“The story is very different today,” he added. DBS notes projections that say hyperscalers are set to pour US$1.4 trillion into AI infrastructure between 2025 and 2027.

Investors should focus on companies that leverage AI for efficiency and profitability, suggests DBS. They should avoid companies that undertake large capital expenditure that may eventually end up being a drag on the business.

Large-cap firms are better-positioned to scale and capture productivity gains, the report from the chief investment office noted.

While DBS is optimistic overall on the sector, it remains cautious over high valuations and circular financing risks.

“The rise of circular financing, a trend where companies fund one another’s growth, echoes the vendor-financing practices of the late 1990s, and therefore deserves close scrutiny for systemic vulnerabilities,” the report added.

Nonetheless, Hou noted that big tech companies will be able to generate “impressive double-digit earnings growth” in the coming years.

In addition, big tech companies’ spending plans, while massive, remain proportionate to gross domestic product.

Healthcare a laggard

The high growth rates of the tech industry are expected to spill over into the healthcare sector, which Hou described as a “big laggard” in the market.

Over the past five years, the healthcare sector has risen just 68 per cent, as compared with 228 per cent for technology stocks.

“Traditionally, healthcare exhibits the characteristics of a defensive sector,” said Hou. However, more upside is expected.

“With the advancement and proliferation of AI, the innovation angle from accelerating drug discoveries has come into play,” he elaborated.

DBS noted that there have been significant advances in treatment for diseases that were once thought to be incurable – such as Huntington’s disease.

This fatal neurodegenerative disease was successfully treated for the first time in September 2025 through novel gene therapy, the lender pointed out.

In addition, venture capital investment for the longevity industry has increased by more than 1,900 per cent from 2013 to 2024.

“This provides long-term funding necessary for high-risk, capital-intensive research development, and acts as an anchor for other investors,” said the report.

Macro headwinds

Despite its positive stance on the tech sector, DBS noted that macro headwinds, specifically the rise in “fiscal dominance” in the US, are here to stay.

Hou argued that the US is entering an era where the Federal Reserve may lose its independence, rolling back the 1951 Treasury-Fed Accord that has kept fiscal and monetary policy separate.

“(US President Donald Trump) is attempting to roll back this accord by pressuring the Federal Reserve through installing a new Fed chairman, as well as FOMC (Federal Open Market Committee) members who are aligned with him in slashing interest rates,” he noted.

Diluting the Fed’s independence will “certainly increase” the risk of escalating inflation going forward, he added.

Also on Monday, Tan Su Shan, chief executive officer of DBS, said: “This year, there will be a remaking of the global economy.”

Speaking at the DBS Private Bank market outlook for the first half of 2026, she noted that the speed of change across various sectors, including AI and longevity, is expected to continue picking up.

“It’s fast, and the volatility is going to continue,” she said at The Ritz-Carlton, Millenia Singapore.