Big Investors Are Seeking New Strategies in the AI Craze

London - Major investors are taking cautious steps against this rise, fueled by the excitement and fear surrounding artificial intelligence. The goal is to revive a strategy that succeeded during the dotcom era of the 1990s; a strategy that had helped some investors weather the crash.

As American stocks break records one after another and Nvidia's value surpasses $4 trillion, professional investors are exploring ways to profit from the bull market. Some, recalling the internet boom, are shifting away from high-value stocks and targeting shares with more upward potential.

Francesco Sandrini, a senior multi-asset manager at Amundi, Europe's largest asset manager, stated that this approach is based on the successful strategy of the 1998-2000 period. Sandrini pointed out signs of irrational exuberance on Wall Street and expects the excitement surrounding new technologies to continue, with a desire to invest in assets with rational values to achieve gains.

Other investors plan to exit Wall Street's "Magnificent Three" stocks following the tripling of Nvidia's shares over the past two years while wanting to maintain their diversity in AI sectors.

Simon Edelsten, CIO of Goshawk Asset Management, noted that being within a new technology bubble is risky, as many companies are in competition with one another and investing in a market that has yet to fully form. He anticipates the felt AI enthusiasm will spread from companies like Nvidia and Microsoft, Alphabet to other related sectors.

Edelsten emphasized that successfully navigating the stages of bubble bursts historically has been a way to play without taking risks, noting that hedge funds outperformed the market by 4.5% during the internet bubble.

What active managers need to do is to remain agile. Becky Qin, a multi-asset manager at Fidelity International, pointed out that uranium is the new AI trading opportunity, while Kevin Thozet from Carmignac's investment committee plans to invest in shares of Gudeng Precision, a Taiwan-based company producing delivery boxes for AI chip manufacturers, while securing profits from the Magnificent Three stocks.

Investors are worried that excessive demand in data center construction could destabilize the market. Arun Sai, a senior multi-asset strategist at Pictet Asset Management, noted that excesses are inevitable in a new technology paradigm. Evaluating AI stocks backed by strong revenues, Sai highlighted Chinese stocks as a risk management tool that could shake Wall Street's AI enthusiasm.

Some investors prefer to balance U.S. tech stocks with European and healthcare assets. Oliver Blackbourn, a portfolio manager at Janus Henderson, stated that if AI stocks collapse, the U.S. economy could also be negatively affected, and it is impossible to predict exactly how such a collapse would impact positions. Blackbourn said, "We are in 1999; we will understand this when the bubble bursts."