Australian retirement savings, known as superannuation, are increasingly intertwined with the fortunes of global technology and artificial intelligence (AI) companies. Experts indicate that a significant portion of these funds, potentially up to 12% in balanced portfolios, is now invested in AI-related firms, including major US tech giants often referred to as the 'Magnificent Seven' (Nvidia, Alphabet, Apple, Microsoft, Amazon, Meta, and Tesla).
This growing exposure means that many Australians are now indirect shareholders in these companies through their pension pots. Notably, some funds have even invested in Elon Musk's space exploration venture, SpaceX, which recently made the world's largest stock market debut on 12th June. The Association of Superannuation Funds of Australia (ASFA) confirms this unexpected link for many savers.
The primary reason for this trend is the investment strategy employed by Australian super funds. To maximise risk-adjusted returns not readily available in the domestic market, a substantial portion of members' savings is invested internationally. These global investments often track major benchmark indices, which are heavily weighted towards the US market, the world's largest capital market. This approach, combined with broadly diversified portfolios, has reportedly driven average annual returns of approximately 10% for balanced funds over the past three years.
Despite SpaceX's substantial market entry, the immediate individual impact on Australian portfolios is considered relatively modest. ASFA estimates an average Australian super fund member's exposure to SpaceX at around AUD$50, with one of the largest funds, Australian Retirement Trust (ART), reporting approximately AUD$15 per member. ART's head of investment strategy, Andrew Fisher, stated the fund's focus remains on generating the highest returns for its members, without strong ethical objections to AI investments, citing their early backing of data centre company AirTrunk.
However, this increasing, often 'unavoidable', exposure to tech stocks is prompting questions about ethics and financial risk. Dale Gillham, Chief Investment Analyst at Wealth Within, highlighted potential ethical concerns related to privacy, copyright, labour displacement, and the substantial energy demands of AI. He also noted that funds promoting environmental, social, and governance (ESG) policies might still hold shares in companies members could deem unethical. Furthermore, the concentration of investments in tech stocks, which constitute a third of the US market compared to just 3% of Australia's ASX, could expose Australians to what some consider an unacceptably high financial risk if the US tech giants face a significant downturn.