AI trading leaves investors vulnerable to painful losses: Evercore

Artificial intelligence trading can leave investors vulnerable to significant losses.

Evercore ISI’s Julian Emanuel warns that Big Tech concentration in the S&P 500 is at extreme levels.

“The AI ​​revolution is probably pretty real, pretty big. But…these things come in waves. And, you get a little too much excitement and the stocks sell out,” the senior managing director said. company to CNBC’s “Fast Money” on Monday.

In a research note published this week, Emanuel listed Microsoft, Apple, Amazon, Nvidia and parent Google Alphabet regarding grouping in names.

“Two-thirds [of the S&P 500 are] driven by these five big names,” he told host Melissa Lee. “Audiences continue to be disproportionately exposed.”

Emanuel reflected on “strange conversations” he’s had over the past few days with people who view Big Tech stocks as hiding places.

“[They] actually look Goods of treasure and wonders if they are safe. [They] look at bank deposits over $250,000 and ask yourself if they are safe and putting money into the top five large-cap tech names,” Emanuel said. ” It’s extraordinary.

This is particularly concerning as the bullish activity comes as small cap stocks come under fire, according to Emanuel. THE Russell 2000which is exposed to pressure from regional banks, is trading closer to the October low.

To protect against losses, Emanuel is overweight cash. He finds 5% yields attractive and plans to put the money to work in the next market downturn. He believes this will be triggered by the debt ceiling chaos and a struggling economy over the next few months.

“You want to stay in the more defensive areas. Interestingly enough, with all this AI talk, health care And basic consumption have outperformed since April 1,” Emanuel said. “They will continue to outperform.”



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