Jun 23, 2026
If analysts insisting that the AI bubble is reaching its imminent end are correct, American markets could be in for a doozy to the tune of an estimated 20% correction for the S&P 500. That would have devastating repercussions even for investors who haven’t touched tech stocks.
An ill-fated and unignorable series of trends has emerged across indexes that have experts fearing a dot-com-style or worse crash: a record chasm between AI frontrunners and other segments, the relentless punishment of historically stable stocks, market concentration that is increasingly financed by debt, overvaluation and overinvestment with unproven returns, and more.
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With only a handful of stocks propping up record market highs, pundits like Michael Burry are warning that the end of this hollow bull run is near, while the Bank of America has even provided a roadmap for how to survive a post-bubble environment.
To protect yourself before that point, diversification is prudent across sectors, indexes and even borders.
Europe equity markets: a safer bet?
To avoid the fallout from a potential bubble burst, those with low risk tolerance have likely already pulled out of any ETFs or mutual funds with AI exposure.
Opting for equal-weight ETFs instead of a market-cap-weighted index fund can help lessen risk, as can investing in non-tech sectors like healthcare, utilities, materials or industrials. While diversifying across asset classes, investors may want to lean more heavily into REITs, particularly non-office REITs, bonds, especially government bonds, precious metals or physical real estate if they’re trying to shield from AI risk.
Moving away from tech-focused indexes such as the S&P 500 and Nasdaq could also help investors feel more at ease in the face of AI speculation. For some, that may mean looking to the NYSE. For others, it could mean considering “old world” international markets, such as Europe.
As Raphael Thuin, France’s Tikehau Capital head, told Bloomberg,
“When you invest in Europe, you are diversifying away from the risk in tech,” As Raphael Thuin, France’s Tikehau Capital head, told Bloomberg. “The investment case for the ‘buy Europe’ trade is back.” He added that Tikehau has recently doubled down on its European exposure.
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Earlier this month, strategists at Goldman Sachs, Barclays, HSBC Holdings and others also issued improved forecasts for the Stoxx Europe 600 Index, boosted by factors such as the US-Iran peace talks and high earnings expectations. Goldman Sachs has emphasized the European market’s comparatively low valuations, decent returns and broader base.
“Not only is the US market concentrated in terms of size of companies and market cap, but it’s also concentrated in terms of returns. Very few companies have driven the returns in the US.” Goldman Sachs Senior European Portfolio Strategist Sharon Bel said in a June 5 episode of the firm’s The Markets podcast. “In Europe, it’s been a bit broader.”
Though some are wary of Europe’s vulnerability to energy prices, surveys show fund managers are more hopeful about the index’s performance in the coming year versus the coming months, with banks, defense and cyclical sectors looking the safest.
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Things to keep in mind
Overdiversifying is its own concern, as is overstrategizing or overtrading. Just because The Big Short’s Michael Burry shorted the AI rally for $1 billion doesn’t mean you should do the same.
But rebalancing when appropriate and reasonably reallocating or hedging to shift away from risk could help protect against AI-related losses, if investors are worried about them. That could include talking to a financial advisor about European markets.
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Becky Robertson is a senior staff reporter at Moneywise and a lifelong writer. Along with more than a decade covering news at outlets like blogTO and Quill & Quire, she's attended writing residencies around the world. With 33 countries visited, she finds travel to be among her greatest inspirations.
