Chief Strategist Paul Dietrich shares two options for overcoming the AI ​​collapse

• Paul Dietrich has weighed in on two alternative AI investments, saying the tech boom is a bubble.

• Wedbush’s chief strategist recommended utilities and gold as strong bets to weather any problem.

• “People think there’s no limit to these things, but there are always limits,” he said of the bullish AI race.

Chief strategist Paul Dietrich has warned that the AI ​​boom is a bubble, and suggested where investors should turn.

Those betting on the technology are betting that it will increase productivity and generate profits for companies that exploit it, sparking a growing debate over whether rising AI stocks warrant their sky-high valuations or are destined for collapse.

Dietrich, chief investment strategist at Wedbush, told Business Insider that the uptrend reminded him of the hype and speculation during the… Dot-com bubble The late 1990s and the housing bubble of the mid-2000s.

“They didn’t make any 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 about the dot-com stocks they had just gotten into. The same thing is happening today.”

Nvidia shares have risen nearly 13-fold since the start of 2023, pushing the chipmaker to a market cap of $4.5 trillion. This figure exceeds the combined value of Berkshire Hathaway, JP Morgan, Walmart, Eli Lilly, and Visa.

Dietrich, who manages money for private investors, institutions and pension funds, said he believes AI will “change everything”, but added that valuations are “out of control”.

“People think there’s no limit to these things, but there are always limits,” he said. Dietrich added that blue-chip stocks such as Microsoft Tank during the dot-com crash. Shares of the enterprise software giant fell 63% over the course of 2000.

He also said he was concerned that retail investors were using borrowed money to place larger, riskier bets in an attempt to inflate their returns.

“There are more people Leveraged ETFs“Especially in technology,” he said. “We’ve never seen such a big market downturn with the kind of leverage that I see behind buying stocks. That’s my biggest concern right now.”

“If the market starts to decline, you want to get out of these things very quickly,” he said.

Dietrich said the government’s injection of trillions of dollars into the economy over the past five years may have supported demand and avoided problems.

“It’s been kept out of the recession,” he said. “But it did not abolish the laws of gravity.”

Dietrich predicted Sprawling data centers AI support will become a “commodity business,” with its makers turning into “utilities of the future” and looking more like AT&T than Apple.

The centers require huge amounts of energy and water to operate. That makes utilities “probably one of the best investments for a long period of time to come,” he said, especially since they can switch energy sources as needed and regulators ensure they make enough profits.

“Only invest in a utility because it will get that guaranteed return,” he said, calling them “quasi-bonds” because they generate large, reliable profits.

Dietrich also said it “makes sense” to invest in gold, which surpassed $4,000 an ounce for the first time this week. He added that all of his clients have at least 25% of their investment portfolios in the metal.

The financial guru said it was Bullish on gold Because it was believed that the US government was trying to devalue the dollar to make exports more competitive and to lower the real value of the national debt, making it easier to repay.

He added that gold could also be a good hedge against accelerating inflation due to tariffs.

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