"Google's CEO, Sundar Pichai, recently made some alarming remarks about the ongoing AI rally. He sees some "irrationality" in the current AI boom, saying that no company would be unscathed if the bubble were to pop. Obviously, this includes Google, and for the CEO of one of the biggest AI beneficiaries to say it means storm clouds may be brewing on the horizon."
"If AI is indeed in a bubble and the rally collapses in the coming months, the impact on the rest of the market could be catastrophic. Some investors are already moving their profits to defensive dividend ETFs in anticipation. These stocks will soften the blow if the market goes down sharply. And even if the rally does continue unabated, you'll still get to cash in the dividends and partake in some upside."
"SPDR Dow Jones Industrial Average ETF Trust (DIA) The SPDR Dow Jones Industrial Average ETF Trust tracks the price and yield performance of the Dow Jones Industrial Average. This gives it exposure to 30 blue-chip U.S. stocks that usually do better whenever there is a downturn. If that downturn is centered around a non-blue-chip theme, like AI, they can do even better."
Next year may differ from the past three, creating opportunity to rebalance into defensive positions. Prominent tech leaders have warned of excessive investor enthusiasm around AI and potential bubble risks that could hurt many companies. A collapse of the AI rally could severely impact broader markets, prompting some investors to shift profits into dividend-focused ETFs. Dividend ETFs provide regular cash income and exposure to cash-generating blue-chip companies, which can cushion losses during market downturns and still offer upside if markets continue higher. The SPDR Dow Jones Industrial Average ETF (DIA) exemplifies this approach with diversified, predominantly non-tech top holdings that generate significant cash flows.
Read at 24/7 Wall St.
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