Hello. Hi everyone. Thank you so much for the lovely audience. Thank you. Esteemed panelists, we're going to have a great conversation. We have 30 minutes to talk about deploying capital given all of the uncertainties, i.e., geopolitics, higher rates, energy transition, reshaping of global supply chains. So let me start off with you. When you look at the structural shifts, what do you think will have the biggest impact on deploying capital in the future?
Well, you need to think of the long term. I think there are four key forces. I think ultimately we are multi-generational funds, so we tend to think about three years and five years and beyond. But when you think of the long-term lenses, there are a few forces that are major. One of which is AI innovation and when and how it will get implemented. The second one is geopolitics and trade. Third one is around demographic shifts. And the last one, not on the physical balance sheet, is fiscal discipline. The interesting thing is that those forces could have positive and negative correlation with each other. So someone needs to watch what are the adjustments happening along the way and the long-term focus, but also short-term tactical. It's quite difficult to come up with an actual way to know what's going on. But I think AI innovation, what it could do for humanity, is huge. And the only way to do it is by having a very strong foundation and a strong investment process. And it's a marathon. You check your pulse along the way.
Micro, how should we deploy capital differently today than we did five years ago?
You know, look, the drivers today are different. I think getting just out of the region, everywhere in the world, we are building energy. We're doing energy transmission, we're doing energy transition, we're building infrastructure, we're building next-gen manufacturing, we're ramping defense. Oh, and we're also doing AI and data. In short, we're spending every dollar, euro, pound since the invention of fire. The demand for capital is overwhelming, and I think capital will go wherever it is respected. And so lots of demand really driving our business, is driving what you do, and driving what you do.
I think Mark said it very well. Capital drives what we all do. And at the end of the day, capital looks for opportunity. You know, I'm a pretty optimistic guy. There's certainly a lot of friction in the world at the moment, but there's an enormous opportunity. And you see it across all sectors as economies continue to evolve and capital goes to places where it's needed to drive positive results, growth, good economic outcomes. And I think one of the things that we've all come to understand is there is an abundance of capital. Capital is a commodity. What's not a commodity is ideas, locales, security, innovation, open markets. You know, those are the things that attract capital at the end of the day. But it's governance.
But governance is not the one I was for sure on. David, I mean, how does, you know, compared to prior industrial revolutions, like beyond the semiconductors and the hyperscalers, like how do you invest in this?
We're in a technology supercycle. There are extraordinary opportunities. I think one of the things that's important to think back on and reflect on whenever we have a new technology that's driving capital and innovation, and I would be the first to say the pace of this technology has been very, very quick. But I also think you have to look that we're changing the way the technology is deployed in the enterprise and governments and the economy. It's going to take 10, 20 years to really see the results of that and the impact of that. And so we get caught in the moment of what's going on at the moment, but what we really have to step back and understand is that this technology is going to do extraordinarily positive things for our society. There are incredible opportunities that come from it. There also are issues and processes and guardrails and governance. The smart part is that we have to really think about carefully. And that's not something that's going to be solved next week, next month or this year or next year. That's something that's going to roll out over an extended period of time. You look at the last big technology innovation around the internet. And there were things that happened 15 to 20 years after the internet started to disrupt society that were very, very profound. And so this is a long-term game. I think we all need to take a deep breath, slow down, highly confident humanity will be here and that we'll all be participating actively.
I was just, I also, I mean this I guess is the trillion-dollar question, right? How do you know that there are genuine AI businesses, given all the changes and the chops you want to invest now for something that is here and the number one winner in five years?
When you think, we really take a deep breath, as David suggested, and you think about it, this is what we're going to in terms of CapEx required for artificial intelligence, this is the largest ever. When it comes to infrastructure, it's spent and financed privately. So the amount of capital expected to go, and energy, which is about 60%, I think, or 50% of what people expect of us to enable AI, and the amount of CapEx. When you combine the, I saw the charts you guys displayed on the hyperscalers and the ten afterwards. I mean, you go on to a trillion and a half or two, a trillion trillions over the next five years. So it's a huge spend. So this has to happen in addition to becoming a reality. And that is actual activity gains along the way. So, um, so someone, we have a lot of investment ideas. You need to be extremely selective because such a large cycle and a long cycle, it will take a lot of time to adapt, and you want to avoid as much as you can make mistakes along the way.
Is there a danger we're going too fast?
There is a danger that we're going too fast. But I think the data coming from the empowerment, if I am, activity gains, is also promising. AI could be a solution to solve scientific problems around health, around drug discovery, making people's lives better. When you think about the people who have multiple jobs or all of us who spend a lot of time working, there is a probability where you spend less of your time on tedious missions where you spend more time on productive missions. So while there is that opportunity, there are also risks involved. Definitely like run.
I guess I put a finer point on it. I think we can say AI works. The fundamental change in our organizations by the marginal cost of software being driven into next to nothing has made whole businesses possible, discoveries possible, ways we organize totally possible. What we don't know is what the return on spend will be. So I think we have to separate the two. And so I look at the leverage that the economy has to it. Ten companies now are 50% of the S&P. All ten companies are levered to the exact same trend. I think that leaves us vulnerable to return on investment without any lack of confidence that we're experiencing fundamental change. That is real. And I think from a capital point of view, we have to recognize that not every bit of capital going into AI is risk capital. Some of it's going to build energy, which has lots of uses. Some of it is going into chips, which are going to be needed for lots of things. Yes. Is some of it totally tied to the investment outcome of the economic business model of models? Absolutely. But the scale of it is beyond anything we've ever done previously in modern finance. So it looks like an industrial, the bigger than the industrial revolution. It is that fundamental. And a lot of it is being financed with equity, which I think is a decent shock absorber for the financial system with whatever risks it may present for financial markets.
David Solomon, if you look at the world, we can see it's fragmented. We can see that, you know, because of tariffs and trade, does it stay this way? And how do you diversify away from geopolitical risk?
It's hard to diversify away from geopolitical risk. We all operate globally, capital moves globally, markets are open up by and large. Not entirely. But we're going through a period of time. And I don't think that period of time is going to be short where there's more fragmentation throughout there and, you know, therefore, different barriers to growth, different frictions. I think you have to accept the landscape, have a lens that that landscape is going to be around for an extended period of time. And I think about at the margin how that changes some of your investment patterns and the flows of capital. And that's kind of what we all do for a living. And, you know, I think for most of us, for people that do that, get out of the moment and they think more about five, 10, 15, 20-year trends and try to kind of take themselves away from the noise that we all deal with on a day-to-day basis. You know, with the ecosystem of the world that we all have to navigate, it's hard. If you don't know what's happening tomorrow or if it actually isn't. I actually think that's one of the problems. I mean, I'm not, look, I'm not a, I run a big enterprise. I'm not a trader for a living. I really don't care what happens tomorrow. You know, as long as it's, I can't tell you what's going to happen tomorrow. I can't, I can't tell you what's going to happen in three weeks, but I step back and talk to you about things that over the next five, 10, 15 years, I think are going to happen that are going to be really important for the world, really important for capital flows, really important for economic growth, really important for productivity gains. And so I think that's the point. Stop worrying about what's going to happen tomorrow and try to think about, you know, how to deploy capital to get the right kinds of returns over an extended period of time.
Sheikh Mohammed used a very good analogy. He talked about an earthquake. But almost all earthquakes are preceded by tremors and plate shifts. Do we have more risk today, or did we have more risk a year or two ago? My view is this has been a de-risking. We've now tested the supply chain. We've tested resilience. We've tested the system. The risk of what we're seeing today, it's been there for 15 years. Not addressing it in some ways was even riskier than addressing it. And so I'm with David. You step back and you look at the long-term trends. It's why we're so bullish. And I know David's organization as well is so bullish on investing in the Gulf. As a quick note as well, I think both inspire us to spend a minute. I think the point on segmentation is globally, from a global trade point of view, is a sizable one. And any type of fragmentation is a bit about, you know, from an economic standpoint. So this pushes more pressure on inflation and also more CapEx required. So as a global government spending more on defense, on infrastructure, that maybe is unnecessary. Otherwise, if you have a better global trade, that is less capital going to AI to actually empower it to the next level. What's interesting is that those major term trends are happening at the same time, and they require a large magnitude of financing and investing. The world is looking, of course, at infrastructure, bolstering supply chains, logistics and defense capabilities.
What will be the Sheikha's role for Qatar in Qatar?
So our focus is really to focus on the investment, the global investment portfolio, as His Excellency Sheikh Mohammed indicated today towards an establishment of a well, very well thought-through vehicle, which is the Doha investment that focuses on the domestic enablement. The more and more and more details will be highlighted this time and that globally, we take in trying to take a deep view of those long-term trends and trying to find favorable transactions that will sell to some of those financing requirements.
David, you were very clear, like let's, you know, forget the noise and look long term. But again, to find balance of globalization, reshoring, national security. So how do you see that triangle?
Yeah, those are, I mean, you're talking about longer, you're talking about longer-term trends. And you know, I think one of the things, you know, we live in a world of media soundbites and, you know, reshoring, you know, that's a big, complex thing. Everything's not going to be short, okay. But some things will be. You know, our job as capital allocators is to really think about how those trends really will play out, what's not the sound bite in the short term, but what are the dynamics of longer periods of time? Because you can't, you can't make these changes. You can't change supply chains without a five or 10-year view. For enterprises to change the supply chains, they've really got to have a strategic view about the direction of travel. And so, I think these are, you know, complicated issues that you don't need to know the answer every day and right away. You can make bets or hedge your bets or move in a direction. You're running capital allocators from diversified portfolios where they do a variety of different things, and you can place capital in different directions. They have a hedge against that. And as you have more information and more perspective, you know, you can move, you know, more in that direction. But the basis of all of this for capital allocators, I come back and I want to amplify this because I think this is to the point when I say I don't care about what happens tomorrow. Of course, if something awful happened or something really significant happened, of course I would care. But I've got a deep belief that one of the exciting things about the world that we live in today is that this technology is going to create productivity gains in the economy and productivity gains for people broadly that are very, very significant. And the result of that is if we get those productivity gains and we figure this out, we can actually run economies at a higher level of base growth than we've been running. And that is a very, very powerful thing. And so eye on the prize. You know, the long term, that's what we're really trying to drive toward as capital allocators. We want to play a constructive role in that.
To follow David. I think governments around the world understand that this is happening. There are places that have spent a little capital over a very long period of time. Qatar, the Gulf countries, massively hospitable to capital. Other places in the world that have been less hospitable for capital are trying to get their act together. They understand what David said. You're going to have winners and losers in the AI game. If you are not a sovereign or adjacent to a sovereign, are you going to experience the same productivity gains? Can the world let everyone grow at the same? Or is growth going to be uneven? And I think leadership understands this. And whether political reality will allow them to move their countries far enough along to be good users of capital, good uses of new technology is a debate.
I'm sorry. Do you agree with all of that?
I agree, I definitely agree. And I think because, as you know, you have to focus on your processes and remain having a sizable part of their portfolio, but isolated from those impacts and focusing on long-term does not mean that you're always long-term. You have to observe those trends and find your right bets along the way. There's no other way than having a diversified portfolio. And as David said, you have to worry about things that are a bit longer term.
I want to talk a little bit about the US, but before we do that, David Solomon, is there an investment that everyone in the room thinks is obvious that you actually believe is wrong? Do you think there's wrong the market that you see us as?
