As tech giants pump billions into AI, warnings of a dot-com era-style market shakeout are mounting. Experts recommend this insurance.
• AI sector facing critical turning point
• Nervousness on the market: will the bubble burst?
• JPMorgan recommends investment-grade ETFs as protection
AI worries in the stock market
The artificial intelligence (AI) hype is at a critical tipping point as skepticism grows in the technology sector about the economic viability of the massive investments. While industry giants such as Amazon, Microsoft, NVIDIA and Alphabet are investing astronomical sums in expanding their AI infrastructure, the capital markets have reacted with increasing nervousness in recent weeks. Concerns about an “AI bubble” and an impending economic setback have already led to massive losses in market value in the trillions. Investors are increasingly questioning the relationship between huge capital expenditure (capex) and near-term profitability, as Futurism explains.
“We’ve suddenly gone from fear of coming last to the view that investors are questioning every single aspect of this AI race,” said Mamta Valechha, consumer products analyst at Quilter Cheviot. “The market is rethinking its approach to AI,” Fabiana Fedeli, chief investment officer for equities at M&G, told the Financial Times, arguing that investors are “much more selective in choosing the companies they bet on.”
Experts are also increasingly drawing parallels to the subprime crisis of 2008 or the dot-com bubble of the late 90s. Particularly prominent voices such as former Goldman Sachs boss Lloyd Blankfein also urge caution. He sees signs of an impending market shock and warns of “hidden leverage” and opaque, illiquid assets that could destabilize the global financial system. Blankfein compares the current situation to the calm before the storm, in which the nervousness of market participants is already clearly noticeable. According to Futurism, he also fears that opening up AI companies to public investments in a late market phase could particularly endanger small investors and taxpayers if the “AI bet” fails.
JPMorgan: Investment-grade ETFs in focus
Given the increasing market focus on a few tech giants and the growing uncertainty about a possible AI bubble, many investors are looking for ways to make their portfolio crisis-proof. According to Börse Online, the experts at JPMorgan recommend a strategic look beyond the stock market in their current analysis: corporate bonds with a high credit rating (investment grade) are currently considered an ideal buffer against AI-related price falls.
The decisive advantage lies in the sector distribution. While the stock market is massively dominated by the technology sector and is therefore prone to volatility, tech stocks play a significantly smaller role in the public credit markets. This means that US investment grade bonds have not only delivered solid returns year-to-date, but have done so with just a quarter of the stock market’s daily volatility.
Historical comparisons also support this strategy: JPMorgan refers to the experiences from the dot-com bubble. At the time, it became clear that high-quality bonds provided crucial downside protection as sentiment towards tech stocks turned. ETFs that rely on such investment-grade bonds represent a practical way to stabilize your portfolio while the AI race continues to cause unrest on the stock markets.
Editorial team finanzen.net
By the way: Alphabet A (ex Google) and other US stocks can even be traded on finanzen.net ZERO until 11 p.m. (without order fees, plus spreads). Open a depot now for free and secure a new customer bonus!
Selected leverage products on Alphabet A (ex Google)
With knock-outs, speculative investors can participate disproportionately in price movements. Simply select the lever you want and we will show you suitable open-end products on Alphabet A (ex Google)
The leverage must be between 2 and 20
Advertising
