Global Courant 2023-05-09 05:47:06
Artificial intelligence trading can leave investors vulnerable to significant losses.
Julian Emanuel of Evercore ISI warns that the concentration of Big Tech in the S&P 500 is extremely high.
“The AI revolution is probably quite real, quite significant. But… these things unfold in waves. And you get a little bit too excited and the stock sells,” the company’s senior executive told CNBC’s “Fast Money” on Monday.
In a research note published this week, Emanuel Microsoft, Apple, Amazon, Nvidia and Google older Alphabet as concerns due to clustering in the names.
“Two-thirds (of the S&P 500) are driven by those top five names,” he told host Melissa Lee. “The public continues to be disproportionately exposed.”
Emanuel reflected on “strange conversations” he’d had over the past few days with people who viewed Big Tech stocks as hiding places.
“(They’re) really looking T accounts and wonder if they are safe. (They’re) looking at bank deposits over $250,000 and wondering if they’re safe and putting money into the top five large-cap tech names,” said Emanuel. “It’s extraordinary.”
It is especially concerning because the bullish activity comes as small caps are slammed shut, according to Emanuel. The Russell 2000exposed to pressure from regional banks, is trading closer to the October low.
To protect against losses, Emanuel is overweight in cash. He finds returns of 5% attractive and plans to put the money to work during the next market downturn. He believes it will be fueled by debt ceiling chaos and a troubled economy in the coming months.
“You want to stay in the more defensive sectors. Interestingly enough, with all this AI talk, healthcare And consumer staples have performed better since April 1,” said Emanuel. “They will continue to perform better.”
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