Government engagement with AI creates more uncertainty for investors, Bridgewater CIOs warn

July 27 (Reuters) - The engagement of government with AI could potentially slow the adoption and progress of the technology and create more uncertainty for investors, Bridgewater's co-chief investment officers said in a note to clients on Monday.

Although regulation has a crucial role to play in reducing the chances of harmful outcomes, it could destabilize the AI capex cycle by reducing the return on capital or simply raising the uncertainty investors face when investing over longer horizons, wrote the investment firm's co-CIOs, Bob Prince, Greg Jensen and Karen Karniol-Tambour.

The comments come as Washington has stepped up the oversight of new model releases to identify potential threats, as concerns swirl over national security risks.

The Trump administration is taking a more active role in monitoring the technology's capabilities, and is launching an AI and cybersecurity coordination group to share information on cybersecurity vulnerabilities identified by advanced AI systems and coordinate responses.

While a tightening of interest rates and a drawdown in equities are unlikely to disrupt the desire to spend on AI, Bridgewater warned that concentration in AI comes with other risks such as sensitivity to disappointment on scientific progress or government AI regulation.

"The expansion relies on the willingness to finance the AI build-out, which now requires substantial capital," the co-CIOs said.

Bridgewater, founded by billionaire investor Ray Dalio, is widely considered to be one of the world's most successful hedge funds.