NEW YORK — Wall Street strategists are urging investors to diversify their portfolios after a recent AI-sector selloff reminded financial professionals of a little-known investment concept last seen sometime before Nvidia went up 900%.
The recommendation follows reports of enormous losses tied to concentrated AI exposure, prompting several banks to publish urgent research explaining that portfolios should contain more than one incredibly popular thing.
“We believe investors should consider broadening exposure beyond AI,” read one note, quietly replacing a July report titled Why Literally Everything Should Be AI Now.
Strategists suggested allocating capital across sectors such as healthcare, energy, industrials, consumer staples, and other companies investors vaguely remember from before every earnings call included the phrase “generative AI.”
Wall Street described the approach as “diversification,” an advanced portfolio-management technique in which an investor owns several assets so that one disappointing Tuesday cannot erase the GDP of a small country.
The strategy had fallen out of favor as AI stocks rose relentlessly, causing diversification to become widely viewed as an unnecessary drag on returns practiced primarily by people who hate money.
Analysts now believe the concept may deserve another look.
“Concentration creates tremendous upside when prices go up,” explained one strategist. “The issue we recently discovered is that mathematically identical concentration also exists when prices go down.”
Banks emphasized that investors should not abandon AI entirely, however, warning that excessive diversification could leave portfolios dangerously exposed to the possibility that AI stocks immediately start going up again.
The current recommendation is therefore to diversify cautiously until confidence returns, at which point everyone can pile into the same seven stocks again.
Inspired by:
Reuters - "Investors should diversify beyond AI trade, says CIO" (August 15, 2026)
