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For investors to profit, the artificial intelligence industry does not need to continue operating.<\/p>\n
That is the unusual message from longtime market professor Jeremy Siegel.<\/p>\n
Siegel, a Wharton professor emeritus and senior economist at WisdomTree, said on the Oct. 30 “Behind the Markets” podcast that weakening enthusiasm for AI could push long-term Treasury yields lower and help value stocks.<\/p>\n
That would turn one of investors’ main concerns now into an opportunity elsewhere.<\/p>\n
Technology stocks have already shown how quickly sentiment can change. The Nasdaq Composite dropped 2.9% on Oct. 30 as investors questioned AI valuations and the enormous amounts companies are spending on infrastructure.<\/p>\n
However, Siegel claims that the same factor that is harming technology equities may be beneficial in other areas.<\/p>\n
The need for cash may decrease if businesses become less aggressive about constructing data centers and funding AI systems. According to Siegel, it may result in lower long-term interest rates.<\/p>\n
In general, lower rates increase the value of current bonds and may support equities in industries that have had difficulty with the AI trade.<\/p>\n
For ordinary investors, that creates a simple lesson: owning something besides the biggest AI winners may finally matter again.<\/p>\n
Jeremy Siegel sees a second side to the AI trade<\/p>\n
Siegel starts his case by showing how much money AI is attracting.<\/p>\n
Technology businesses are investing a lot of money on networking equipment, data centers, processors, and power.<\/p>\n
Capital is needed for the expenditure.<\/p>\n
Siegel contends that increased real interest rates are a result of the giant demand for funds to support the AI buildout.<\/p>\n
The process might go the other way when questions arise about whether businesses can generate enough returns on such investments.<\/p>\n
In his Oct. 26 WisdomTree commentary, Siegel wrote that the 10-year Treasury yield had moved back below 5% as investors questioned the durability of the AI investment boom.<\/p>\n
Bonds and rate-sensitive value stocks were somewhat relieved by the news.<\/p>\n
The stock market has already seen this change.<\/p>\n
According to Siegel, despite a severe selloff on the Nasdaq, the S&P Value Index and the Russell Value Index both just hit all-time highs.<\/p>\n
He doesn’t think the current technology industry is similar to the dot-com bubble.<\/p>\n
He does, however, recognize a lesson from that time.<\/p>\n
Value stocks increased when the Nasdaq peaked in March 2000 and then fell around 60% over the next year.<\/p>\n
“If AI goes down, yields will go down,” according to Jeremy Siegel.<\/p>\n
Jeremy Siegel says the AI selloff could create new winners<\/p>\n
Bloomberg \/ Getty Images<\/p>\n
An AI pullback could help parts of investors’ portfolios<\/p>\n
That does not imply that the stock market would benefit from an AI catastrophe.<\/p>\n
Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOGL), Amazon (AMZN) and other companies tied to the AI boom could face pressure if investors become less confident that enormous infrastructure investments will generate sufficient returns.<\/p>\n
More Wall Street:<\/p>\n
Nvidia and Micron are about to lord their successes all over Wall Street<\/p>\n
Nvidia, Palantir, and Alphabet send waves through Wall Street<\/p>\n
Wall Street elites will pocket windfall from record $46 billion profits<\/p>\n
However, an investor focused just on AI could have a completely different experience than one who holds bonds, value stocks, and technology.<\/p>\n
Value equities and bonds are ideal hedges against the AI trade, according to Siegel.<\/p>\n
The reasoning is simple.<\/p>\n
Technology businesses may profit from quicker growth if AI expenditure keeps rising. Bonds and other rate-sensitive assets may face pressure if high demand for funding keeps long-term interest rates elevated.<\/p>\n
The connection may change if AI spending is lower than expected.<\/p>\n
Weaker data center building, according to Siegel, would result in reduced financing demand, slower economic growth, and less pressure on inflation.<\/p>\n
Interest rates could drop as a result.<\/p>\n
Because their current fixed payments are more appealing than freshly issued debt, bonds usually increase as market rates decline.<\/p>\n
Additionally, lower yields might make value and dividend-paying equities more competitive with bonds.<\/p>\n
As a consequence, one investment in the portfolio may be able to offset weakness in another.<\/p>\n
Jeremy Siegel says diversification matters again<\/p>\n
Owning technology hasn’t given investors much cause for complaint.<\/p>\n
Even after the Oct. 30 selloff, the Nasdaq remained up 9.4% for 2026, according to the Associated Press.<\/p>\n
However, current market activity highlights the danger of presuming that a small number of businesses can consistently generate profits.<\/p>\n
The Nasdaq dropped 2.9% Oct. 30, while worries about AI spending hit technology shares and Treasury yields fell as investors sought safer assets.<\/p>\n
Although he does not anticipate a recurrence of the dot-com disaster, Siegel has previously said that an AI failure might result in a 20% to 30% Nasdaq drop.<\/p>\n
Compared to another forecast on whether AI is a bubble, his thesis is more useful to the typical investor.<\/p>\n
Investors do not necessarily need to accurately predict the future of AI.<\/p>\n
They may own assets that, depending on the circumstances, act differently.<\/p>\n
Technology companies may continue to gain if AI expenditure continues to provide significant returns.<\/p>\n
Bonds and value stocks might act as a counterbalance if interest wanes and long-term rates drop.<\/p>\n
Siegel’s warning has a hidden opportunity.<\/p>\n
Whether Nvidia and other technology companies climb or fall may depend on more than just the next phase of the AI trade.<\/p>\n
It could decide which underutilized components of an investor’s portfolio eventually start to perform well.<\/p>\n
Related: Wharton’s Jeremy Siegel has blunt message on interest rate hikes<\/p>\n
#Jeremy #Siegel #sees #unexpected #winner #weakens<\/p>\n","protected":false},"excerpt":{"rendered":"
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