Perhaps a good measure of a stock market bubble is the proportion of these claims that get believed by investors, and the reaction of the share prices.
Among the largest companies in the equities space, I still believe Microsoft, Nvidia, Amazon and TSMC will be the core providers of AI infrastructure, but I doubt that the first two offer good value at current prices.
Within tech stocks, Accenture and Palo Alto may offer better value and longer-term growth potential with less risk of the current boom slowing. However, if the tech stock leaders are overpriced, all such stocks are likely to fall with them.
To add diversification to your Magnificent Seven holdings (or your tracker holdings that are a fifth Mag seven), you could either add US equities left behind by the AI boom, yet likely to benefit — UnitedHealth and Union Pacific Railroad — or you could balance growth with deep value by buying something at the opposite end of the market from US tech, such as mining shares or Japanese banks.
The best time to rebalance is when only one part of a portfolio has done well — it is a decision that should always feel uncomfortable, contrarian and too early. Indeed, you have to be early, but that is better than being too late.
That is not the same as trying to time the market, but rather about not having all of your eggs in the same basket.
Simon Edelsten ran global equity funds for 40 years
