Artificial intelligence: Boom or bubble?
One unresolved tension in any assessment of the US economy is the role that artificial intelligence is playing in buoying economic growth. In the short term, according to Schuster, the substantial spending on AI-related research and technology could potentially influence markets.
“We’re talking about hundreds of billions of dollars that were spent last year,” says Schuster. “That’s more than 1% of GDP. And it’s anticipated that it may continue throughout 2026 and potentially for several years in the future. And those dollars go to more than just semiconductor chips. They also go to entities and workers that build these data centers, install cooling units, supply energy needs, and so on and so forth. These are conditions that could potentially support US stocks.”
That said, there are some concerns that we may be reliving the “dot-com” bubble of the late 1990s, where enthusiasm for the early internet eventually led to a significant decline in technology stocks. According to Schuster, however, the current market looks somewhat different from what we saw in the dot-com era.
Learn more: Investing in AI: What you should know.
”For example,” says Schuster, ”the tech sector today has positive earnings growth and price-to-earnings ratios that are much lower than what we saw at the peak of the internet boom in the year 2000. There’s a very distinct difference.”
Schuster believes that we are likely still in the initial stages of the AI buildout, and while the potential for enhanced productivity and cost savings may be several years in the future, there isn’t necessarily any indication that investment in AI is likely to slow anytime soon.
With this in mind, Strategic Advisers maintains a healthy allocation to US stocks, including many AI-related investments. That said, they continue to actively manage risk through investments in small-cap and value stocks. Furthermore, Strategic Advisers also sees an opportunity for diversification in international stocks, which may be more exposed to the banking and industrial sectors and less exposed to some of the concentration risk that the technology sector may present in US stocks.
“Trying to determine when a boom becomes a bubble and when that bubble might burst is tricky business,” says Schuster. “We don’t want to get too ahead of ourselves by getting too conservative too quickly, because then we run the risk of leaving meaningful returns on the table.”
As always, no matter what the markets might hold for investors in the future, diversification can help to make a difference, allowing you to benefit from the potential for long-term growth while managing risk in accordance with your goals and needs. While volatility is inevitable, how you respond to it is up to you. And with a personalized plan and the guidance of an investment professional who understands you and your financial situation, you can work toward building a resilient portfolio that is designed to adapt to various market conditions.
