Published on July 14, 2025 9:34 AM GMT

This paper proposes sovereign wealth funds (SWFs) as a foundational policy instrument for states to navigate the economic and strategic challenges posed by transformative artificial intelligence (TAI). I explore the rationale for public investment in AI-related assets, drawing on analogies from resource governance and historical state-led development. I evaluate how different types of SWFs—strategic, stabilization, and savings funds—could be adapted to invest in compute infrastructure, upstream supply chains, and equity in frontier AI labs. My analysis identifies key pathways through which public ownership can shape TAI development, mitigate economic volatility, and distribute AI-derived wealth more equitably. I assess the design tradeoffs of ownership models, from minority stakes to majority control, and highlight political and institutional constraints on implementation. By comparing SWFs’ potential to that of laissez-faire or purely regulatory approaches, I argue that SWFs offer a flexible, scalable tool for democratic states to retain strategic influence over TAI while preserving fiscal legitimacy. I conclude by outlining scenarios under which SWFs may succeed or fail, providing a structured framework for policymakers to evaluate this institutional lever in managing the AI transition.