Until recently, investors believed AI would force companies to rethink their business models, fuel productivity growth — and ultimately push inflation lower.
That’s all changed, at least for the time being, according to BlackRock’s Spring 2026 hedge fund outlook released today.
The asset manager argues that not only are the investments that companies need to make in chips, metals, energy infrastructure, and data centers massive, with about $5 trillion worth of capital expenditures expected through 2030. But there are not enough of those supplies to go around. The ingredients to take advantage of AI are “finite and bottlenecked” while revenues and productivity gains are still years away.
The warning comes at a moment when inflation is already proving more persistent than investors expected. BlackRock says looser monetary policy remains priced into many markets even as demand surges for energy and rare minerals and a Middle East war pushes oil prices sharply higher. Those forces have pushed bond yields higher and weakened government bonds’ role as a refuge just as investors had grown more confident inflation was fading.
Markets, however, appear to be pricing in the opposite outcome — assuming that AI will soon ease inflation pressures rather than extend them.
“AI may be disinflationary over time — but its near-term impact is inflationary,” Tom Becker, a senior portfolio manager on the Global Tactical Asset Allocation team, wrote in the report. That dynamic, BlackRock argues, leaves policymakers and investors grappling with higher rates and tighter financial conditions even as enthusiasm around AI accelerates.
Like J.P. Morgan and others, Michael Pyle, deputy head of the Portfolio Management Group, believes the environment is a good one for hedge funds, which can potentially find opportunities created by supply shocks and navigate market rotations as AI disrupts sectors and companies.
Investors have been moving money into hedge funds for several years, in part because of strong fund performance and expectations that volatility would rise after stocks’ steady climb since 2008. BlackRock cites more recent data from its alternatives research group Preqin that shows interest in hedge funds is at its highest level in five years.
BlackRock does expect that AI will eventually boost productivity, but the payoff may be uneven and could come with higher real interest rates, not lower ones. And the asset manager expects AI investments — and the price increases associated with the spending — to continue to rise though the decade, with the benefits coming in the 2030s.
In fact, as Institutional Investor reported in 2023, many hedge fund strategies do better when rates are higher.
According to research firm PivotalPath, from 2000 to 2025, when 10-year Treasury yields averaged between roughly 3 percent and 6 percent, the PivotalPath Composite Index, which includes more than 40 strategies, annualized 12 percent, compared with about 9 percent for the S&P 500. Multi-strategy and relative value hedge fund indices returned 13 percent and 13.1 percent, respectively, beating equity quant strategies (7.7 percent) in higher rate regimes.
By contrast, in low-rate environments — a yield at 3 percent or below, hedge fund returns were more muted and equities dominated. PivotalPath’s Composite Index annualized 7.7 percent; multi-strategy and relative value returned 7.1 and 6.5 percent, respectively.
In the report, BlackRock says that the inflationary environment favors global macro, systematic, relative value, and market neutral strategies less exposed to duration risk. These approaches, the firm argues, are better suited to an economy facing supply shocks and faster regime shifts.
“As differentiation across markets increases, the opportunity set for hedge funds expands with it,” adds Pyle.
