Barclays Warns AI Trade Is Entering Mature Phase
Barclays advised investors to diversify portfolios and be more selective with AI stocks as valuations and revenue visibility face increased scrutiny.
Strategists at Barclays warned on Friday that the artificial-intelligence trade is entering a more mature phase and may no longer be a one-way trade. A team led by Emmanuel Cau advised investors to diversify portfolios and exercise greater selectivity, noting that valuations, regulation, and revenue visibility are now under increased scrutiny.
The bank identified several headwinds contributing to this shift, including a decline in chip stocks, rising oil prices driven by Middle East tensions, and hotter-than-expected inflation data that increases the likelihood of Federal Reserve interest-rate hikes. Barclays suggested that European markets could serve as a diversifier if the AI trade continues to unwind.
Despite these warnings, the bank recommends holding big tech stocks ahead of third-quarter earnings reports, which begin with Meta and Tesla on October 21. However, the firm expressed a preference for companies that possess fair valuations and proven business models.
