Workers at top AI companies are getting anxious about an AI bubble, and they’re scrambling for answers about what to do with their newfound wealth before the music stops.
It’s a moment ripe with opportunity for the ranks of Silicon Valley wealth managers, who say are advising employees at companies like Anthropic, OpenAI, and AI hyperscalers on how to invest as markets get frothy.
Despite some optimism that the AI boom will chug on in perpetuity, many industry insiders are feeling wary about high valuations in tech, and are taking steps to cut risk, diversify, and in some cases, build an exit plan in case AI ends up disappointing, according to advisors and financial planners who spoke to Business Insider.
Compound Planning, an investment advisory with over $5 billion in assets under management, says fears of an AI bubble are being voiced in nearly every conversation with clients. Many of them, who work at frontier tech firms like Anthropic, OpenAI, Cursor, and the Magnificent Seven giants, are struck by the sheer speed at which their wealth has grown in just a few years, according to Nicholas Garcia, a principal wealth advisor at the firm.
The stock market shows this to a degree. The Nasdaq 100 has climbed 91% over the last five years.
US households were sitting on a collective $55 trillion in stock wealth in the first quarter, up from $34 trillion in the fourth quarter of 2022, when ChatGPT debuted.
The fortunes of private companies are even wilder. Valued at around $40 billion in 2024, Anthropic is preparing to go public at a valuation of $2 trillion. SpaceX employees are seeing their shares unlocked after an IPO that valued the rocket company at $1.75 trillion. ChatGPT maker OpenAI boasts a valuation of $1 trillion as it eyes its own public offering in the near future.
“The dollar amounts have gotten so big, so fast,” Garcia told Business Insider in an interview.
Most people in the industry are not running for the exits, though some are trying to position their portfolios specifically for a bearish “what if” scenario, Garcia said. He estimates around 5% of his clients are panic sellers, though the group of people looking to dump their AI investments is growing.
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At Mercer Advisors, an investment advisor with $111 billion in assets under management, one of the biggest concerns being voiced by clients is “concentration risk” in the tech sector, Adam Govani, a wealth advisor for the firm, said. The firm says it works with clients from a wide range of public and private tech and AI companies.
Tidemark Financial Partners, an investment advisor that manages over $400 million in assets and works with employees from Nvidia, Meta, Microsoft, and other Magnificent Seven firms, says it’s also been inundated by clients worried about an AI bubble over the last 18 months.
About half of clients could stand to reduce their exposure to tech and growth stocks, though the other half appear to be prepping for the crash and could stand to increase their exposure to the sector, Jared Redfield, a financial consultant for the firm, told BI.
Here are the five money moves advisors say are becoming more common among their Big Tech clients:
1. Structured selling
Many employees are quietly setting up liquidation schedules and/or plans to liquidate their stock awards, such as selling at the next opportunity once their company’s shares surpass a certain level, Compound Planning’s Garcia says.
Among clients who are selling, many are looking to lock in a certain quality of life and ensure future expenses are covered, such as housing, education, and retirement. Some are also aiming to pass on generational wealth to their children, Garcia and Govani say.
A predominant concern among sellers is mitigating the tax hit, given how quickly asset prices have climbed in recent years. Here are some of the common strategies that were mentioned:
Tax-loss harvesting. This is a common tax-management strategy in which investors sell losing investments to offset realized capital gains from winning investments.Direct indexing. Instead of purchasing a fund that tracks an index, such as the S&P 500, investors purchase the individual components of that index. It’s considered a “supercharged” method for tax-loss harvesting, as it allows investors to sell losing index stocks to offset capital gains, Redfield said.Long-short strategies on publicly diversified investments. Long-short strategies involve taking long positions in areas of the market that investors expect to rise, while shorting areas they expect to fall. Investors can sell losing positions in a long-short portfolio to offset investment gains in other areas, Garcia said.Variable prepaid forwards. This is an agreement that allows a shareholder to cash in a large position in a stock, though the actual stock delivery occurs at a future date. The idea is that investors can defer their capital gains tax hit, possibly when they’re in a lower tax bracket.
Many clients are aware that the run-up in their companies’ stock prices in recent years was a “once in a lifetime opportunity,” Mercer’s Govani says.
“There’s a realization that taking some chips off the table is a prudent way to meet their goals,” he said, adding that the selling was generally “very measured.”
2. Some are ‘splurgers’
Some Big Tech employees are splurging on Bay Area real estate, Garcia says.
Amy Osborne for The Washington Post via Getty Images
A small minority of clients — around 5% to 10%, Garcia estimates for his firm — are “splurgers,” in that they’re willing to cash out large portions of their stock awards to pay for big upfront expenses.
Real estate is a top purchase among these spenders, Garcia says, adding that many industry insiders were using their stock awards to help them purchase a primary home in the Bay Area. More profuse spenders are also looking at vacation homes and luxury cars.
Splurgers typically need more “a lot of coaching” due to lifestyle creep, Garcia said, adding that many clients who lived in the Bay Area were technically living paycheck to paycheck despite having six-figure salaries, largely due to the high cost of living.
“You buy a $5 million primary home, a $2 million vacation home, new cars, help family, and then they could take a breath six, 12 months and they’re like, ‘Where’d all my money go?” he said.
3. Investing in real estate
Others are attempting to invest in the commercial real estate or multifamily real estate market by buying property or investing in REITs.
REITs outperformed the broader equity market with this year, particularly those linked to certain property segments like data centers, self-storage, and healthcare. Lodging and resorts was the best-performing area of the REIT universe in the first half of the year, rising 42%, according to data from the National Association of Real Estate Trusts.
“That’s come up more now that interest rates are hopefully coming down soon,” Garcia said of multifamily properties in particular, adding that the hope among many investors was that the asset would be less volatile than others.
4. Betting on AI-adjacent themes
Many Big Tech workers seeking to diversify are exploring private investment vehicles, Garcia said, pointing to venture capital and other private assets.
Neocloud stocks are another theme many clients appear to be excited about, Redfield said.
The subsector has generally outperformed this year. Here are some of its top winners year to date:
“You always hear about, ‘Why go for the gold mind when you can be the one selling the shovels?'” Redfield said of interest in the sector.
5. Bonds for tax breaks
Municipal bonds are another area of interest among clients, Garcia notes.
Investing in munis, which bear interest that is usually exempt from federal income tax, can be a method for investors to lower their tax bill, Redfield said.
“It’s almost kind of saying, “Hey, I know I’m going to pay some sort of toll on this road in order to get to my destination, but, rather than paying more, I would like to pay a little bit less,'” he said.
The asset class has remained mostly stable so far this year, with the iShares National Muni Bond ETF down 1% year to date.