How are investors tweaking investment strategies to limit exposure to the expected AI bubble burst
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The stocks of many AI giants have doubled over the past few years. Photograph: (Imagined by AI)
Artificial Intelligence news: Experts say the next wave of AI spending will spread to allied sectors, spreading away from Nvidia and Microsoft.
Major investors are bracing for a market correction by shifting away from stocks that have been riding on the perceived artificialintelligence bubble. This strategy helped many investors survive the late 1990s' dotcom crash.
The stocks of many AI giants have doubled over the past few years. For instance, AI chipmaker Nvidia, which used to cater to a niche market of graphics cards before the AI boom swept global markets, is enjoying a valuation of beyond $4 trillion. As many experts believethat the AI bubble is bound to burst, professional investors have been attempting to find ways to make money from the bull market while avoiding excessive risk.
How are investors tweaking investment strategies to avoid the expected AI bubble burst
Francesco Sandrini, multi-asset head and Italy CIO at Europe’s largest asset manager, Amundi, told Reuters that what the company is trying to achieve worked between 1998 and 2000, when the dot-com bubble burst, leading to a massive market correction.
He said there are signs of irrational exuberance on Wall Street. He said his firm is trying to tap into the highest growth opportunities that so far the market has failed to spot, including software groups, robotics and Asian tech.
Goshawk Asset Management CIO Simon Edelsten says that the odds of the AI boom being a bust are very high. He said that the companies are spending trillions of dollars in a market that does not yet exist. He, however, said that the next wave of AI spending will spread to allied sectors, spreading away from tech giants like Nvidia and Microsoft.
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Experts said that stocks linked to IT consultants and Japanese robotics groups can potentially pick up revenues from AI heavyweights.
"When someone strikes gold, buy the local hardware store where the prospectors will buy all their shovels," said an expert.
Investors are also exploring the option of benefiting from tech giants like Amazon and Microsoft without risking direct exposure. These companies are planning to build a mega AI infrastructure, like AI data centres and advanced chip manufacturing facilities. Instead of investing directly in these companies, investors are looking for firms linked to creating this infrastructure.
Fidelity International multi-asset manager Becky Qin said uranium was her favoured new AI trade because power-hungry AI data centres could gobble up nuclear energy.
Kevin Thozet, investment committee member at asset manager Carmignac, said that his firm is exploring taking positions in firms like Taiwan's Gudeng Precision, which makes delivery boxes for AI chipmakers, including TSMC.
Many experts believe that Chinese stocks can be used as a hedge, as the country is expected to make rapid advancements in artificial intelligence.