He argues for diversification beyond the U.S. AI trade as a hedge against possible downside or a prolonged tech sell-off, drawing a parallel to past cycles.

JPMorgan strategist cautions that U.S. equity market momentum driven by AI stock gains is at risk of a divergence, warning that the strongest AI beneficiaries may not sustain momentum.

The intro frames the warning by comparing current AI-driven gains to a dot-com era dynamic and emphasizes the need for broader exposure.

Over the last year, the iShares Semiconductor ETF SOXX surged about 90%, outpacing AI hyperscalers like Alphabet, Amazon, Meta, Microsoft, and Oracle.

This rotation—semiconductors leading while hyperscalers lag—has historically preceded broader market weakness in previous cycles.

The article cautions that history doesn’t guarantee a repeat of dot-com busts, but signals risk when demand-driven beneficiaries stay strong even as other stocks roll over.

The author personally prefers SPDW for its lighter AI tilt, while acknowledging VEU’s exposure to growth themes like Taiwan.

Recent performance context shows both funds delivering about 28% annualized return over the past year, with roughly 19% over three years and around 9% over five years, illustrating diversification benefits and different top holdings.

International diversification options include two developed-world ETFs: VEU (ex-US) with broad exposure and higher AI tilt, and SPDW (developed markets ex-US) with lighter AI concentration and similar efficiency, offering alternative exposure.

SPDW comprises about 2,439 stocks across 25 developed markets with a 0.03% expense ratio, delivering similar recent returns and being less top-heavy in AI-related holdings than VEU.

Disclosures note JPMorgan’s advertising partnership with Motley Fool and remind readers that the article does not present new stock recommendations beyond ETF comparisons.

Context cautions that AI-driven valuations and stock ideas from The Motley Fool Stock Advisor should be viewed with care, as past performance of recommendations is not indicative of future results.