SINGAPORE – Amid fears of an artificial intelligence bubble, much has been made of recent reports suggesting that AI has yet to generate returns for companies investing billions into adopting the tech. 

But that’s not what the chief executive of Southeast Asia’s largest bank is seeing — she says her firm is already reaping the rewards of its AI initiatives, and it’s only just the beginning. 

“It’s not hope. It’s now. It’s already happening. And it will get even better,” DBS CEO Tan Su Shan told CNBC  on the sidelines of Singapore Fintech Week, when asked about the promise of AI adoption.  

DBS has been working to implement artificial intelligence across its bank for over a decade, which helped prepare its internal data analytics for recent waves of generative and agentic AI. 

Agentic AI is a type of artificial intelligence that relies on data to proactively make independent decisions, plan and execute tasks autonomously, with minimal human oversight.

Tan expects AI adoption to bring DBS an overall revenue bump of more than 1 billion Singapore dollars (about $768 million) this year, compared to SG$750 million in 2024. That assessment is based on about 370 AI use cases powered by over 1,500 models throughout its business. 

“The proliferation of generative AI has been transformative for us,” Tan said, adding that the company was experiencing a “snowballing effect” of benefits thanks to machine learning. 

A major area in which DBS has applied AI is in its financial services to institutional clients, with AI used to collect and leverage data for clients in order to better contextualize and personalize offerings. 

According to Tan, this has resulted in “faster and more resilient” teams. The CEO believes that these uses of AI have contributed to a recent uptick in the bank’s deposit growth as compared to competitors’.

The company also recently launched a newly enhanced AI-powered assistant for corporate clients known as “DBS Joy,” which assists clients with unique corporate banking queries around the clock. 

MIT released a report in July that found 95% of 300 publicly disclosed AI initiatives, encompassing generative AI investments of $30–$40 billion, had failed to achieve real returns. 

However, at least in the banking sector, there are signs that the tides are turning. 

While DBS doesn’t differentiate spending in generative AI from other in-house investments, other major banks have recently offered this comparison. 

JPMorgan Chase CEO Jamie Dimon stated in an interview with Bloomberg TV last month that the bank is already breaking even on its approximately $2 billion of annual investments in AI adoption. That represents “just the tip of the iceberg,” he added.

Those expectations are shared by DBS, which plans to continue to accelerate its AI development to become an AI-powered bank.

The ultimate goal, according to Tan, is for its generative AI to develop into a trusted financial advisor for clients, including retail users who are expected to interact with personalized AI agents through the DBS banking app. 

The bank already has over 100 AI algorithms that analyze users’ data to provide them with personalized “nudges,” such as alerts on incoming shortfalls, product recommendations, and other insights. 

The company has launched several AI reskilling initiatives across departments this year and has even deployed a generative AI-powered coaching tool to support these efforts. 

This will help the company automate mundane work and refocus its staff on building and maintaining human-to-human relationships with customers, rather than reducing headcount, Tan said. 

“We’re not freezing hiring, but it does mean reskilling. And that’s a journey. It’s a never-ending journey … a constant evolution.”

Morgan Stanley’s Mike Wilson sees a meaningful rotation back into U.S. stocks, and he sees one beaten-up group as a winner.

“It started out with a low-quality rally, which is what we expect – meaning a short squeeze,” the firm’s chief investment officer told CNBC’s “Fast Money” on Monday. “Then, what we noticed is the revision factors on the Mag Seven are actually starting to stabilize a bit. So, the last couple of days though stocks have acted better, and that can take the index higher. How high? 5,900. So, we’re almost there.”

The major indexes had a notable start to the week. The S&P 500 gained roughly 1.8% and closed at 5,767.57 — about 6% below its all-time high. Meanwhile, the Dow jumped almost 600 points while the Nasdaq Composite surged more than 2%.

The “Magnificent Seven” had a big role in Monday’s rally. Its members include Apple, Nvidia, Meta Platforms, Amazon, Alphabet, Microsoft and Tesla. The electric vehicle maker registered its best daily performance since November.

But Wilson, who’s also the firm’s chief U.S. equity strategist, suggests a narrow window for gains. He focused his Monday research note on the idea.

“Stronger seasonals, lower rates and oversold momentum indicators support our call for a tradeable rally from ~5500,” he wrote. “A weaker dollar and stabilizing Mag 7 EPS [earnings per share] revisions can drive capital back to the US. Beyond the tactical rally, volatility will likely persist this year.”

And, he won’t rule out new lows for the year.

“Whatever rally we’re getting now, we think probably end up fading into earnings, into May and June,” he added. “Then, we’ll probably make a more durable low later in the year.”

According to Wilson, the market weakness is mostly tied to fundamentals and technicals.

Disclaimer

The Trump administration may create powerful tailwinds for two vastly different market groups: Big banks and small cap stocks.

In the case of financials, Astoria Portfolio Advisors’ John Davi predicts deregulation — along with a boost in IPO and mergers and acquisitions — to spark multi-year strength.

“The funny thing about the banks is that they were actually from an earnings standpoint fundamentally getting very attractive prior to the Trump administration,” the firm’s founder and CEO told CNBC’s “ETF Edge” this week. “The large-cap money centers like Goldman [Sachs], JPMorgan, Bank of America, Morgan Stanley… That’s really the area you want to hone in on with this new administration.”

The money center banks are coming off a strong week. Shares of Goldman Sachs, JPMorgan Chase and Morgan Stanley hit record highs on Friday.

Those historic gains are a major reason why Davi likes the Invesco KBW Bank ETF. Its top holdings include JPMorgan, Goldman Sachs and Morgan Stanley, according to FactSet.

The ETF is up almost 10% since Jan. 1 and more than 49% over the past 52 weeks.

While bank stocks rally, VettaFi’s Todd Rosenbluth expects small cap stocks to shine under Trump 2.0. He implies the group would be largely insulated from reshoring and tariff threats.

“If we have a focus on the U.S. and making America even stronger, then small-cap companies stand to benefit from that because they have less multinational exposure,” the firm’s head of research said.

Rosenbluth suggests the T. Rowe Price Small-Mid Cap ETF and Neuberger Berman Small-Mid Cap ETF as ways investors can play the group.

He also likes the VictoryShares Small Cap Free Cash Flow ETF, which has solid exposure to biotech. Its top three holdings, according to the fund’s website, are Royalty Pharma, Oscar Health and Jazz Pharmaceuticals, and its mission statement is to target “quality small cap companies, trading at a discount with favorable growth prospects.”

According to Rosenbluth, the ETF “takes a focus on companies with high quality, strong free cash flow generation, but it has a growth filter to it.” He added the filter sets a high bar when it comes to which small caps ultimately make the cut. 

The VictoryShares Small Cap Free Cash ETF is up almost 10% over the past year while the Russell 2000, which tracks the group, is up about 17%.

By CNBC “ETF Edge” Staff

Disclaimer

The Consumer Financial Protection Bureau on Thursday announced the final version of a rule limiting banks’ ability to charge overdraft fees. It says the rule will save American consumers $5 billion annually.

The regulator said that banks could opt to charge $5 for overdrafts — a steep drop from the average fee of around $35 per transaction — or limit the fee to an amount that covers the lenders’ costs, or charge any fee while disclosing the interest rate of the loan.

“For far too long, the largest banks have exploited a legal loophole that has drained billions of dollars from Americans’ deposit accounts,” CFPB Director Rohit Chopra said in a statement. “The CFPB is cracking down on these excessive junk fees and requiring big banks to come clean about the interest rate they’re charging on overdraft loans.”

While overdraft fees have been a lucrative line item for the industry, generating $280 billion in revenue since 2000 according to the CFPB, banks’ revenue from the service has been on the decline. That’s because lenders including JPMorgan Chase and Bank of America have either reduced the fees or limited the types of transactions that trigger them, while some banks dropped the fee altogether.

The CFPB rule applies to banks and credit unions with at least $10 billion in assets.

The effort, part of a flurry of activity from the CFPB in the waning days of the Biden administration, faces stiff opposition from U.S. banking groups that have successfully stymied other efforts from the regulator. For instance, a rule capping credit card late fees at $8 per incident that was set to take effect in May has been held up in federal court.

The CFPB said its overdraft rule will take effect Oct. 1, 2025, though the rule’s ultimate fate is unclear.

Even before the presidential election victory of Donald Trump in November, the fate of the overdraft rule would have been murky, thanks to industry pushback. But Trump is expected to install a new CFPB head in January who is unlikely to support Biden-era efforts to rein in banking activity.

Bank lobbying groups have argued that the overdraft rule, first proposed in January as part of Biden’s war on junk fees, would reduce access to overdraft services and could send customers to worse alternatives, such as payday loans.

Later Thursday, the Consumer Bankers Association filed a lawsuit against the CFPB in Mississippi, claiming that the agency exceeded its authority and didn’t consider how its actions would impact consumers. The group chose a venue known as friendly to suits challenging federal regulators.

“While it is unfortunate, CBA had no choice but to pursue legal action to counter the CFPB’s blatant statutory overreach with its misguided rule to ensure consumers continue to have access to liquidity through overdraft services,” CBA President Lindsey Johnson said in a statement.

BlackRock’s iShares is trying to appeal to investors who want to diversify beyond from the so-called Magnificent Seven.

The firm launched the iShares Top 20 U.S. Stocks ETF (TOPT) this month. It doesn’t just hold the Magnificent Seven — Apple, Amazon, Meta, Alphabet, Microsoft, Nvidia and Tesla. It’s made up of the 20 largest U.S. stocks by market capitalization.

“What the iShares build ETFs are designed to do is to deliver a tool kit of simple solutions for investors to be able to capture the growth of some of the largest companies within the U.S. equity market today, but to do so in a broader and more diversified manner,” BlackRock’s Rachel Aguirre told CNBC’s “ETF Edge” on Monday.

Aguirre, the firm’s head of U.S. iShares product, noted the ETF’s mission is to deliver an easy and accessible way to tap into the innovation of megacaps – “whether that be in the tech-heavy Nasdaq space or, more broadly, within the S&P [500].”

The ETF, according to Aguirre, provides a way for investors worried about the concentration of the Magnificent Seven stocks in the S&P 500.

On Thursday, the Magnificent Seven slid more than 3.5% as a group — losing around $615 billion in market cap. That’s equivalent to the size of JPMorgan Chase.

However, the Magnificent Seven is still up about 43% so far year while the S&P 500 is up around 20%

“It’s important for clients and investors to remember that there are split views on this topic. There are many investors who believe that the big will get bigger [and] that the winners will continue to win,” Aguirre said. “There’s also another side to this argument. There are many investors who believe that it’s actually a very worrisome time to continue investing in… mega-cap companies because of just their high valuations.”

The iShares Top 20 U.S. Stocks ETF is down 2% since its Oct. 23 launch.

Hundreds of small and regional banks across the U.S. are feeling stressed.

“You could see some banks either fail or at least, you know, dip below their minimum capital requirements,” Christopher Wolfe, managing director and head of North American banks at Fitch Ratings, told CNBC.

Consulting firm Klaros Group analyzed about 4,000 U.S. banks and found 282 banks face the dual threat of commercial real estate loans and potential losses tied to higher interest rates.

The majority of those banks are smaller lenders with less than $10 billion in assets.

“Most of these banks aren’t insolvent or even close to insolvent. They’re just stressed,” Brian Graham, co-founder and partner at Klaros Group, told CNBC. “That means there’ll be fewer bank failures. But it doesn’t mean that communities and customers don’t get hurt by that stress.”

Graham noted that communities would likely be affected in ways that are more subtle than closures or failures, but by the banks choosing not to invest in such things as new branches, technological innovations or new staff.

For individuals, the consequences of small bank failures are more indirect.

“Directly, it’s no consequence if they’re below the insured deposit limits, which are quite high now [at] $250,000,” Sheila Bair, former chair of the U.S. Federal Deposit Insurance Corp., told CNBC.

If a failing bank is insured by the FDIC, all depositors will be paid “up to at least $250,000 per depositor, per FDIC-insured bank, per ownership category.”

Watch the video to learn more about the risk of commercial real estate, the role of interest rates on unrealized losses and what it may take to relieve stress on banks — from regulation to mergers and acquisitions.