Investors are increasingly seeking protection against a potential downturn in the high-flying artificial intelligence sector, as concerns grow that sky-high valuations may not be sustainable. Options-market activity shows more investors buying put options, which can protect against price declines, while demand for bullish call options has fallen.
The International Monetary Fund has warned that a correction in AI asset prices could threaten global financial stability, particularly if high leverage and concentrated investments amplify the effects.
Investors are also diversifying their multi-trillion-dollar AI bets beyond derivatives. Some are shifting into sectors viewed as less correlated with the AI trade, including dividend-paying and value stocks, consumer staples, and healthcare. Others are turning to alternative assets such as gold to help shield portfolios from volatility in a market often compared with the dot-com bubble.