Top strategist Paul Dietrich shares 2 picks to ride out an AI crash

Core Viewpoint - The AI boom is perceived as a bubble, with concerns about inflated valuations and potential market corrections [1][5]. Group 1: Market Comparisons - The current AI stock surge is likened to the dot-com bubble of the late 1990s and the housing bubble of the mid-2000s, characterized by irrational exuberance [2]. - Nvidia's stock has increased approximately 13-fold since the beginning of 2023, leading to a market capitalization of $4.5 trillion, surpassing the combined value of major companies like Berkshire Hathaway and JPMorgan [2]. Group 2: Valuation Concerns - Despite the belief that AI will revolutionize industries, current valuations are considered excessive, with historical precedents indicating that such trends are unsustainable [3][5]. - The example of Microsoft is cited, where its shares fell 63% during the dot-com crash, highlighting the risks associated with overvalued stocks [3]. Group 3: Investor Behavior - There is a growing concern about retail investors using borrowed funds to invest in riskier assets, particularly in leveraged ETFs within the technology sector [4]. - The unprecedented level of leverage in the current market raises alarms about potential rapid declines if the market turns [4]. Group 4: Economic Context - Government stimulus measures over the past five years have temporarily supported demand and delayed economic downturns, but fundamental market principles remain unchanged [5]. - Alternative investment recommendations include utilities and gold as safer options amidst the perceived AI bubble [5].