Prominent investors Increasingly Wager Against AI Rally, Citing Valuation Concerns
NEW YORK – A growing number of investors, including figures known for contrarian bets, are taking positions that profit from a potential decline in the artificial intelligence (AI) boom, signaling mounting skepticism about the sector’s sky-high valuations. While AI stocks have fueled notable market gains this year, concerns are rising that the current fervor resembles a bubble, prompting some to hedge their portfolios or actively short the market.
The shift comes as AI-related stocks, particularly those of Nvidia, Microsoft, and Meta, have seen explosive growth. However, experts caution against attempting to time the market based on speculation about AI’s future.”No one can know the answer for sure, and attempting to adjust your strategy based on a guess is a form of market timing, which historically is not a wise approach,” said alex Michalka, head of investments at Wealthfront. He advocates for long-term investors to prioritize well-diversified portfolios aligned with their risk tolerance and time horizon.
This skepticism echoes historical instances of tech bubbles, and investors are responding accordingly. While specific details of individual bets remain largely undisclosed, the trend suggests a growing belief that current AI valuations are unsustainable.Diversification is key, according to Michalka: “If you’re worried about overexposure to AI, your best defense is to ensure your portfolio is diversified across industries, asset classes, and geographies.” He points out that even investments like the S&P 500, while offering diversification, are heavily weighted towards U.S. stocks, were much of the AI market concentration lies.
Strategies like direct indexing, which allow investors to track an index while perhaps minimizing taxes and excluding specific stocks, are also gaining traction as a way to manage AI exposure. Ultimately, Michalka emphasizes, ”your long-term success hinges not on predicting the future of tech, but on maintaining discipline, diversification, and time in the market.”
