-
Paul Dietrich shared two alternative investments to AI and said the tech boom is a bubble.
-
Wedbush’s chief strategist recommended utilities and gold as two solid bets to overcome any headwinds.
-
“People just think there’s no limit to these things, but there always is,” he said of the AI bull market.
Chief strategist Paul Dietrich warned that the AI boom is a bubble and suggested where investors should take shelter.
Those betting on the technology are betting that it will increase productivity and generate profits for the companies that take advantage of it, fueling a growing debate over whether rising AI stocks justify their sky-high valuations or are destined to collapse.
Dietrich, chief investment strategist at Wedbush, told Business Insider that the bull run reminded him of the hype and speculation during the dot-com bubble of the late 1990s and the housing bubble of the mid-2000s.
“They didn’t make sense,” he said. “Things just kept going up and up.”
Dietrich said of the Internet bubble: “I would go to a party and everyone would tell me what dot-com stocks they had just gotten into. The same thing is happening today.”
Nvidia shares have risen 13-fold since the start of 2023, catapulting the chipmaker to a market capitalization of $4.5 trillion. That figure exceeds the combined value of Berkshire Hathaway, JPMorgan, Walmart, Eli Lilly and Visa.
Dietrich, who manages money for private investors, institutions and retirement funds, said he believed AI would “change everything” but added that valuations were “out of control.”
“People just think there’s no limit to these things, but there always is,” he said. Dietrich added that blue-chip stocks like Microsoft plummeted during the dot-com crisis. Shares of the enterprise software giant fell 63% over the course of 2000.
He also said he was alarmed that retail investors were using borrowed money to make bigger, riskier bets in a bid to amplify their returns.
“More people are in leveraged ETFs, especially in technology,” he said. “We have never seen a big market decline with the type of leverage I see underlying buying stocks. This is my biggest concern right now.”
“If the market starts going down, you want to get out of those things very quickly,” he said.
Dietrich said the government’s injection of trillions into the economy over the past five years may have shored up demand and prevented problems.
“It has come out of the recession,” he said. “But it hasn’t repealed the laws of gravity.”