Cembalest Turns Cautious on US AI Stocks
JPMorgan strategist Michael Cembalest has turned cautious on U.S. equity market technicals, citing recent trends in the artificial intelligence (AI) trade.
In his July 22 report, 'Eye on the Market', Cembalest noted that semiconductor stocks have made big gains while hyperscalers have stagnated.
This is similar to what happened during the dot-com boom in 1999-2000, when communications services stocks slowed their growth even as communications equipment stocks continued climbing.
Cembalest warns that if companies closest to final demand begin to roll over, it could be a bad sign for the entire market.
He recommends diversifying away from U.S. AI stocks by investing in 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).