AI The AI boom has caused concern among investors, who believe the industry may be trapped in a risky circular financing model that could lead to unsustainable growth.
In an interview, Miramar Capital co-founder Max Wasserman stated, "I am cautious about that kind of revolving funding approach. Given its high concentration, you need to diversify your portfolio and be clear about the situation of the assets you hold, as well as the consequences of misjudging them."
He added that if AI trading "goes downhill, it will drag the index down."
The so-called "revolving funding" refers to large tech giants investing billions of dollars in AI startups, which then use that money to purchase cloud services or hardware from those large investors. For example, OpenAI has pledged to deploy at least 10GW of Nvidia cloud infrastructure. The system contains millions of GPUs, and Nvidia plans to invest up to $100 billion in the startup.
Wasserman warned that these trades could mask the extent of capital burn. He added, "Given the high valuations of AI-related trades, market indices remain distorted, ignoring many inherent risks in the market."
Furthermore, as the economy shows signs of cooling, manufacturing activity declines, and layoffs begin to increase, the valuation of artificial intelligence is increasingly deviating from its actual business fundamentals.
Wasserman warned, "I don't think you're likely to get double or even triple-digit returns like before. I think you need to look for opportunities in other markets."
For investors looking to continue investing in the chip sector, Wasserman believes Broadcom... This provides a more robust option. He explained that, unlike many AI companies that rely on speculation about future software revenue to grow, Broadcom has built a strong defensive barrier through hardware specialization and high-margin integration.
Moreover, this strategy has been effective. By the beginning of this year, Broadcom 's stock price had risen by approximately 51%, significantly outperforming the S&P 500. The S&P 500 index rose 17%.
Wasserman argues that Broadcom is "somewhat misunderstood," and its value proposition differs from AI-related companies like Nvidia in three key areas: namely, from VMware (a cloud computing provider)... The integration of U.S. companies with hardware virtualization software and services, dedicated chip technology implemented through custom chips, and a consistent dividend policy.
Furthermore, Wasserman predicts a significant market shift by 2026, at which point the "bull market" will expand. With the Federal Reserve potentially lowering interest rates to address slowing economic growth, another 493 stocks in the S&P 500 may finally have their moment in the sun.
This rotation could lead to a return of funds to seemingly "boring" but stable cash flow industries, like Home Depot . and McDonald's Retailers and consumer staples companies like these are expected to benefit from lower short-term interest rates.
Meanwhile, if the AI bubble starts to "leak"—or, in the worst-case scenario, bursts completely, like Chevron... (CVX), AbbVie (AbbVie) and U.S. Waste Management Defensive giants like this company can provide a "safe haven" and offer stable dividend protection.
Wasserman concluded by emphasizing that investors may not need to short artificial intelligence, but they certainly should not bet their entire portfolio on it.
“We have always reminded investors not to over-concentrate their investments in technology stocks,” he added.
(Article source: CLS)
