I’ve been reading a great deal of interesting news on AI but the most recent and alarming is a trend of some big names selling off some of their AI stocks. Peter Thiel, according to this article, just liquidated all his NVIDIA position.
Michael Burry had short positions in Palantir and Nvidia prior to closing down his fund recently.
Meta AI chief Yann recently left Meta to run his own starting citing LLM is dead.
Along the lines of Meta, Blue Owl, a private equity capital firm recently did some restructuring that is raising eyebrows. It’s an interesting video and worth watching if you are following AI stocks and investments.
What To Do If The AI Bubble Pops?
The best thing to do if the AI bubble is about to pop is to risk manage your portfolio. I have been doing so with net credit collars, covered calls, and put buying in my portfolio. If all of those things sound too complicated then the alternative may be to take *some* money off the table and sell off a small portion of your AI heavy stock portfolio. What that *some* amount will largely depend on your risk tolerance, age, capital, investments and other factors.
The Aftermath
In my opinion, the most important thing is to have cash reserves to take advantage of the panic. Investors often “throw the baby out with the bath water” meaning many people will sell everything, including valuable companies, as part of their panic. This creates a tremendous opportunity to pick some great companies at bargain prices. Alternatively, if stock picking isn’t your thing, buying *some* S&P 500 indexes at various intervals as the market corrects with a long term horizon makes sense to me.
Timing The Market
Lastly, there are often many people that state things like, “don’t time the market” just keep buying and that advice never made sense to me. There are times, like now, that the market has become overvalued. It makes perfect sense to take *some* money off the table now especially as economic conditions deteriorate. It makes even more sense to STOP buying into the market and just hold cash or at a minimum split the difference and only invest 50% in the S&P 500 and hold 50% in cash or some ratio that makes sense for your investment horizon.
Of course, everyone’s financial path is different so doing your own due diligence, risk management and investments strategy is up to each individual.
I will close by saying that I’ve watched dozens of YouTube videos and read dozens or more articles everyday on investments, stocks, and financial news and there are arguments for an AI bubble pop or a continuation of the current bubble for a lot longer time frame. I don’t know what will happen either way, just that I’d rather be safe than sorry.
Share The Wealth
Are you worried about the AI bubble popping? Let me know in the comments below.