Packer & Co quits gold, warns of AI ‘bubble’
'Willy Packer’s WA fund manager has sounded a warning about the artificial intelligence revolution, likening it to the tech bubbles that shredded investors in the 1980s and early 2000s.
Cottesloe-based Packer & Co, which manages the State’s biggest investment fund, has told its investors in mainly Perth’s western suburbs that surging prices for major tech stocks are only reinforcing its long-held belief that equity markets are dangerously overvalued and “disconnected from ... economic realities”.
The AI warning came as the fund manager disclosed that its $2.1 billion Investigator pooled fund beat Australian benchmarks in the 2026 financial year, returning 11.1 per cent after realising its multi-year winning bet on gold.
The firm told investors in its half-year update that the AI boom “has strong echoes of prior technology bubbles like that of Japan in the 1980s and the Dotcom mania in the 1990s”.
“In each case, investors overpaid for the perceived winners of the day and badly underestimated competition,” it said.
“Many of the real winners of the Dotcom era, such as Google, Meta, and Amazon, emerged once the smoke had cleared. “They weren’t the companies that poured fortunes into building the Internet itself.
“Instead, they built their businesses on top of it.
Gary Martin opinion: When AI plays doctor, diagnosis gets dangerous Weaker commodity prices set to tip Australia into trade deficit “Today, these companies are doing the opposite. They’ve gone all-in as the builders of AI infrastructure ... using up all their profits, borrowing money and even raising equity.”
Packer & Co suggested that investors were once more overlooking the sudden rise of competition, notably those in China. “Its best AI models are now almost indistinguishable from the American ones. And as demand continues to grow, China has a huge advantage — abundant electricity.”
Packer & Co invested as much as 14 per cent of Investigator’s portfolio in physical gold and gold stocks in recent years, with its December update putting its bullion holding at 10 per cent. However, with gold nearly tripling over the past five years to a peak of $US5417 an ounce in January, the firm said that “after a strong run”, it had cashed in its profit.
That leaves it conservatively invested, with cash deposits and short-term government bonds now making up 49 per cent of the fund. Another 25 per cent is invested in oil and gas, and uranium. It also added to its holdings in four drilling stocks, betting that they will benefit from renewed demand for fossil fuel energy. Outside of energy, 14 per cent of the fund is deployed in Asia, half in Chinese technology stocks. “We’ve also found new opportunities in the US and Europe, which account for 12 per cent of the fund,” Packer & Co said.
Almost of all of its stock investments are big-name shares in the US, Europe or China, including Chinese energy giant CNOOC (6.5 per cent of the Investigator portfolio), US healthcare company Centene (6.3 per cent) and French supermarkets group Carrefour (2.4 per cent). The return for the 12 months to June 30 compares with the 5.7 per cent returned by the All Ordinaries Accumulation Index, which includes dividend payments.
The S&P-ASX200 grew just 2.8 per cent for the year, but the median growth superannuation fund is believed to have delivered between 9.5 per cent and 10.6 per cent'.