07/02/2026

BIZ & FINANCE SATURDAY | FEB 7, 2026

13 AI tide won’t lift all boats anymore

ORLANDO: Investors are going to have to get a lot more discerning when it comes to artificial intelligence (AI) bets, because the inclusive narrative that drove the widespread boom in US tech stocks last year is over. AI’s rising tide no longer lifts all boats, and those that are sailing along smoothly one quarter could find themselves sunk the next. This week’s so-called “software-mageddon” has wiped roughly US$800 billion (RM3.1 trillion) of market capitalisation from the S&P 500 software and services index, with notable losses among companies like Oracle, Inuit and ServiceNow. According to SocGen, the software sector is having its worst performance against the wider S&P 500 index in 25 years. The root of the latest churn appears to be a new tool from the AI leader Anthropic, a legal plug-in for its Claude AI service that can automate a lot of legal work and, over time, services provided by software firms in sales, marketing, and data analysis. But this week’s slump is not simply about a new, mostly unproven, plug-in. It’s a sign of investors’ realization that the AI revolution is SINGAPORE: The city-state is expected to unveil a fiscally conservative budget next week, focusing on balancing robust growth with longer-term fiscal discipline after elevated support for households in 2025. Bank of America, Maybank and DBS forecast an overall fiscal surplus ranging from 0.3% to 1% of GDP, with economists widely expecting the government to adopt a cautious approach amid a positive economic outlook. The Finance Ministry will likely adopt a cautious fiscal stance due to sanguine growth conditions, and anticipation demand in the economy is likely to be stronger than supply over the next few quarters, Bank of America economists said. “We also expect Budget 2026 to pay greater attention to longer-term measures, aimed at positioning for the future. This contrasts with Budget 2025, which was more “household friendly” than usual amid earlier concerns over the growth outlook,“ they said. Similarly, BMI analysts expect the government to reduce cash transfers to households in 2026 following “elevated support” in 2025. As the government is required to balance the budget over each parliamentary term – the latest of which began after the 2025 general

investors. In times of sectoral dislocation, correlation breakdowns and fluid price moves, bargains and arbitrage opportunities can be found. It’s the proverbial “stock picker’s market.” Michael Toomey, managing director of equities trading at Jefferies, calculates that a record 73% of software stocks and 45% of all tech stocks are oversold, and he argues that the IGV iShares tech software ETF is the most oversold it has ever been relative to the broader S&P 500 index. “I have never seen sentiment this negative in any group in my career,“ Toomey wrote on Wednesday. “I think we’re due for a vicious rally in software.” The problem for these “stock pickers,” however, is that despite their access to copious amounts of data and research, the rapid change in AI and tremendous uncertainty about its impact leaves them essentially flying blind.

push its market cap above US$4 trillion last year, but its share price has tanked 25% in the last three months as investors have questioned whether its massive capex will pay off. This week’s volatility may shine a spotlight on the divergence among sectors and individual names, but, in reality, this trend has been building for a while. Over the last three months, the S&P 500 tech index is up 9%, while the communications services index is down 10%. And the correlation between the six biggest US tech firms – Amazon, Apple, Alphabet, Meta, Microsoft, and Nvidia – has collapsed to the lowest in at least a decade, according to Barclays equity strategists. They expect the shift away from the “rising tide” narrative to continue, creating a “high tech, high-stakes market” that should give fund managers scope for more individual stock and thematic investment strategies. Manish Kabra at SocGen reckons the picture essentially boils down to this: a global software sell-off on one side, and a global semiconductor boom on the other. In theory, this should be good news for The budget will be announced on Feb 12 by Prime Minister and Finance Minister Lawrence Wong at 3:30pm. Singapore’s economy grew by a faster-than expected 4.8% in 2025, according to advance estimates, but Wong flagged earlier challenges to sustaining that pace of growth this year. The Trade Ministry previously forecast growth of between 1% to 3% in 2026. In January, the Monetary Authority of Singapore raised its core and headline inflation forecast to between 1% and 2%, from 0.5% and 1.5% in October. The central bank also expects the global AI led investment that buoyed Singapore’s growth last year to be sustained in 2026 as demand continues to outpace supply. DBS economist Chua Han Teng expects the government to invest in technology and innovation as the nation’s economy faces “increasingly binding land and labour constraints, such as an ageing workforce”. In January, the government released an update as part of its Economic Strategy Review, which stressed the need to direct national research and development resources towards high-value industry sectors, pursue emerging technologies in the areas of quantum, decarbonisation and space technologies, and

entering a new phase where the tech world is splintering, between AI disruptors and AI casualties. Simply buying an index fund and watching it rise on the back of the megacap tech boom is no longer an optimum strategy. Investors will have to pick winners and eschew losers, determining where AI will enhance and where it will disrupt. In other words, after a decade of bumper passive investing returns, active management may once again have its day. The problem, of course, is that no one knows how this particular cookie will crumble. AI technology is in its infancy, and its ultimate impact is still unknown. What that means is that today’s winners may be tomorrow’s losers – such is the bewildering pace of change. Look at how shares in Facebook owner Meta have traded the day following their last two earnings releases. Promises of hefty investment in AI and data centre construction sparked an 11% slump on Oct 30, while a similarly aggressive spending pledge triggered a 10% surge on Jan 29. Take Microsoft. Its apparent first-mover AI advantage among the “Magnificent 7” helped

Tech is in a state of flux and looks likely to remain so for some time. Investors should buckle up – there’ll be more days and weeks like this. This article is contributed by Jamie McGeever, a columnist for Reuters. ‘Less generous’ Singapore budget expected amid resilient growth

“aggressively” support leading local firms to internationalise. Singapore also announced an investment of more than S$1 billion (RM3.1 billion) in public AI research through 2030. Maybank economist Chua Hak Bin expects the government to focus on supporting AI adoption and upgrading national tech investments through existing funds. He added that the government could provide more incentives to encourage firms to hire as the youth structural unemployment rate reaches a four-year high. According to preliminary data from the Manpower Ministry, the citizen unemployment rate edged up to 3% in 2025, from 2.9% in 2024. Bank of America analysts said that they will also be paying attention to Singapore’s corporate income tax collections, which have increased by 1 to 4 percentage points of GDP since 2023 despite ongoing uncertainties surrounding global tax reforms. They highlighted that Nvidia’s annual revenue booked in Singapore surged 10 times to US$23.7 billion (RM93 billion) in the 12 months ending January 2025 from January 2023 figures, while both Google and Amazon have invested significantly in the nation to expand their cloud services. – Reuters

Economists see a conservative Singapore budget as strong growth allows room to rebuild fiscal buffers. – UNSPLASH PIX election – economists expect fiscal prudence to be prioritised early to preserve room for support measures should conditions deteriorate later. Singapore’s budget and economic forecasts will show to what extent tariffs and supply chain disruptions in major economies have affected business activity and key sectors in the financial hub and trade-reliant economy.