Cembalest Sounds Alarm on AI Stocks: Are US Equities Due for a Correction?

JPMorgan strategist Michael Cembalest has expressed caution about U.S. AI stocks due to recent trends.

In a report, Cembalest noted that semiconductor stocks have outperformed major tech names building and paying for AI tools in the past year.

This trend is similar to what happened during the dot-com bubble 25 years ago, when communications services stocks slowed down while equipment stocks continued to climb.

Cembalest warns that if companies closest to final demand start to roll over, even as capital spending beneficiaries thrive, it could be a bad sign for the entire market.

As an alternative, investors may consider diversifying into international stock ETFs, such as the Vanguard FTSE All-World ex-US ETF (VEU) or the State Street SPDR Portfolio Developed World ex-US ETF (SPDW), which offer exposure to global markets and lower AI-related volatility.