Andrew Oxlade, investment director at Fidelity International, noted clear comparisons with the dot-com boom.<\/p>\n
\u201cThen, like now, investors jostled into a narrow set of companies promising to reinvent the world,\u201d he said. \u201cMany of those businesses were loss-making, built on hope rather than cashflow. When the bubble burst, the Nasdaq lost three-quarters of its value.\u201d<\/p>\n
For investors wanting to defend their portfolios against the possibility (or eventuality) of the AI bubble popping, diversification across styles, themes and geographies will be key.\u00a0<\/p>\n
Oxlade said value investing is a \u201cnatural way\u201d to avoid expensive areas like AI. As such, he pointed to Dodge & Cox US Stock<\/a>, noting it has \u201ca good track record and its holdings may find more favour when the AI hype fades\u201d.<\/p>\n The $4bn fund has a 23.9% weighting toward healthcare stocks and 22% in financials, with top holdings including brokerage firm Charles Schwab and pharmacy and healthcare firm CVS Health Corporation.<\/p>\n Dodge & Cox US Stock has made a first quartile total return over five years, up 99.3%.<\/p>\n Fund vs sector and benchmark over 5yrs<\/p>\n Source: FE Analytics<\/p>\n Alternatively, investors could look to increase their smaller company exposure, Oxlade noted. \u201cThese companies will have less reliance on AI hype, and it is an area that has been neglected by investors for a sustained period,\u201d he said.<\/p>\n Brown Advisory US Smaller Companies<\/a> was his pick, with the Fidelity investment director noting that it \u201cseeks out quality-growth from below\u2011the\u2011radar names\u201d.<\/p>\n The fund has been managed by Christopher Berrier and George Sakellaris since 2017 and targets smaller companies listed or traded on US markets and exchanges whose total market values are equal to or less than $5bn at the time of investment. \u00a0<\/p>\n It has struggled to deliver strong total returns compared to its sector over one, three and five years, logging 20.9% over the latter period. However, over 10 years, it has fared better, managing a 166.8% gain \u2013 equivalent to a third-quartile performance compared to its sector.<\/p>\n Fund vs sector and benchmark over 5yrs<\/p>\n Source: FE Analytics<\/p>\n One option highlighted by FundCalibre managing director Darius McDermott, was Regnan Sustainable Water and Waste<\/a>.<\/p>\n \u201cDemand for water and waste solutions is underpinned by long-term structural needs with very low price sensitivity,\u201d McDermott noted. \u201cThese companies operate largely at a local level, making them much less exposed to tariffs or geopolitical disruption.\u201d<\/p>\n The \u00a3260.4m fund has been managed by Bertrand Lecourt and Saurabh Sharma since its launch in 2021, outperforming the IA Global sector but underperforming the MSCI ACWI over that four-year period. It has also managing a 27.4% return over three years.<\/p>\n Fund vs sector and benchmark since 2021 launch<\/p>\n Source: FE Analytics<\/p>\n McDermott also suggested IFSL Evenlode Global Equity<\/a>. \u201cThe fund takes a quality-first approach, backing capital-light companies that can compound growth without heavy reinvestment,\u201d he said.<\/p>\n Earlier this year, co-manager James Knoedler, made a case<\/a> for prioritising companies with characteristics that stand the test of time, rather than getting swept up in megatrends like AI.<\/p>\n \u201cIn contrast, [the managers] invest in financially robust businesses with durable advantages and proprietary data moats \u2013 such as information services providers and payment networks \u2013 that can harness AI to enhance productivity without relying on its success,\u201d said McDermott.<\/p>\n Top holdings in the \u00a3458.6m fund \u2013 which has also been managed by Chris Elliott since its launch in 2020 \u2013 include analytics firm RELX, healthcare services company Wolters Kluwer and payments giant Mastercard.<\/p>\n \u201cWith quality stocks having sold off over the past year, valuations look far more appealing,\u201d McDermott said.<\/p>\n Fund vs sector and benchmark over 5yrs<\/p>\n Source: FE Analytics<\/p>\n If the AI asset bubble were to burst, Marcus Blyth, collectives desk lead at Rathbones Investment Management, made a case for dividend-focused strategies.<\/p>\n \u201cHistorically, dividends have contributed around a third of total returns in the S&P 500 and, in difficult decades like the 1970s or 2000s, they were often the primary source of positive returns.\u201d<\/p>\n Blyth noted that dividends have also accounted for around 60% of long-term returns in the UK market.<\/p>\n \u201cWith the UK lacking the AI tailwind seen in the US, it may offer a relative safe haven and potential upside in a post-AI correction environment,\u201d he said.<\/p>\n![\"\"](\"https:\/\/www.newsbeep.com\/uk\/wp-content\/uploads\/2025\/09\/20250901_ai_bubble_graph_1.png\")
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