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Earlier in 2026, economic commentator and professor Scott Galloway, or Prof G, warned that with about 40% of the S&P 500 tied to AI-focused businesses, investors may need to reevaluate their risk exposure or prepare for a portfolio wipeout. <\/p>\n
“There’s no way they can justify these incredible valuations,” Galloway said on an episode of The Diary of a CEO podcast (1). He also noted that one of the greatest threats to American AI companies is cheaper Chinese alternatives. <\/p>\n
Must Read <\/p>\n
He explained that the “majority of GDP growth over the last two years has come from AI,” and that if that slows, the U.S. would plunge into a recession “immediately.” <\/p>\n
Data from the Federal Reserve Bank of St. Louis backs this up. The Fed found that 39% of total GDP gains in the third quarter of 2025 were driven by AI growth in areas such as software, R&D, information processing technology and data center construction (2). <\/p>\n
This trend appears set to continue. Goldman Sachs estimates that AI investment spending could account for 40% of S&P 500 earnings growth in 2026, while major cloud companies are expected to collectively spend $674 billion on capital expenditures this year alone (3). <\/p>\n
Plus, the S&P 500 has continued to notch fresh record highs in 2026, fueled largely by strong earnings from so-called megacap AI-related companies (4). <\/p>\n
These sound like good things, but there’s a problem: For decades, Americans could build wealth simply by buying broad index funds and waiting. Now, in a K-shaped economy, with the wealthy at the top and the poor at the bottom, investors who haven’t kept up with the times are increasingly exposed to market weak spots. <\/p>\n
“If you’re China,” podcast host Steven Bartlett said, “As [a] leader now, you go, you know what? Give Americans cheap AI, and you’ll kneecap their economy.” <\/p>\n
“One hundred percent. That’s what I would do,” Galloway agreed. “Founders get quite scared that there will be an economic crash in the next 12 or 24 months because of overinvestment in AI.” <\/p>\n
Although Galloway’s warning hasn’t played out yet, he has continued to argue that investors should pay attention to concentration risk and the possibility that AI-related valuations may not match future returns. <\/p>\n
That’s not to say that this is China’s game plan, nor is it the ultimate point of Prof G’s argument. <\/p>\n
Rather, it’s the idea that Americans are heavily invested in AI, with few alternatives to protect them from a recession. <\/p>\n
This raises the question: If 40% of big tech stocks crash, and you’ve committed to a 60\/40 investment split, is today’s playbook really built for tomorrow’s economy? <\/p>\n
Why the market might be more fragile than it looks <\/p>\n
The original appeal of the S&P 500 index was that it let investors own a little bit of a lot of different companies. In a world where more and more top spots are banking on AI, that resiliency comes into question. <\/p>\n
Today, the index is heavily concentrated in megacap technology firms like NVIDIA (NASDAQ: NVDA), Microsoft (NASDAQ: MSFT), Amazon (NASDAQ: AMZN), Alphabet (NASDAQ: GOOG) and so on \u2014 many of which are betting aggressively on AI infrastructure. <\/p>\n
Other major companies, including Apple (NASDAQ: AAPL), Meta Platforms (NASDAQ: META) and Broadcom (NASDAQ: AVGO), have similarly become increasingly tied to the AI investment boom, adding to concerns about how concentrated today’s market has become. <\/p>\n
In fact, the top 10 companies in the S&P 500 now account for roughly 36% of the index’s total weight, according to data from Visual Capitalist (5). <\/p>\n
Many of these big companies have also invested in one another, a practice Bloomberg calls “circular deals” \u2014 where capital rotates among companies at the top of the pile (6). Although this has always, to some extent, been the case, parallels can be drawn to the period when telecom companies invested heavily in one another during the dot-com bubble, leading to a web of dependencies. <\/p>\n
Not everyone sees this situation as being so bleak. For example, an analysis by J.P. Morgan Asset Management notes that these deals are driven by “free cash flow and robust margins” from the hyperscalers themselves (7). This is slightly different from past bubbles where “tightening credit conditions” were the pin that led to the pop, according to the firm. <\/p>\n
Galloway, however, argues that the overrepresentation of AI at the top of the financial food chain creates vulnerability for ordinary investors, especially those relying almost entirely on index funds for retirement savings. <\/p>\n
“Either these companies’ valuations need to be cut by 50 or 70%, or you need a massive destruction in the labor market,” he said on the podcast. <\/p>\n
In other words, the amount of money flowing into AI needs to eventually produce real economic returns, either through explosive revenue growth or massive cost-cutting efficiencies. The promise of efficiency increases is one thing. Fulfilling and quantifying that boost is another. <\/p>\n
While enthusiasm for AI has helped push markets higher, the payoff may take longer than investors expect. <\/p>\n
That’s one reason some Americans are beginning to look beyond stock-and-bond portfolios altogether and toward something new: alternative assets (8). <\/p>\n
Read More: <\/strong>Millionaires under 43 hold only 25% of their wealth in stocks. Here’s where their money is actually going<\/strong><\/a> <\/p>\n Hard assets are back in focus <\/p>\n Gold is one of the most commonly cited alternative assets \u2014 especially when it comes to preserving wealth in a downturn. That’s because gold isn’t tied to any single country, currency or economy, and it can’t be printed at will, like fiat money. This makes it a particularly attractive asset in the face of uncertainty. <\/p>\n Indeed, gold prices have already surged to record highs earlier this year (9), with central banks making significant purchases of gold in the second quarter of 2026 (10). <\/p>\n And although the precious metal has pulled back from some of its recent highs, gold remains “broadly in line” with global market conditions, according to the World Gold Council’s mid-year outlook (11), due to moderate growth, elevated inflation and central bank tightening. <\/p>\n With these conditions expected to continue into the near future, investing in assets like gold that can help cushion your portfolio against market volatility can be crucial. <\/p>\n Start hedging with a gold IRA <\/p>\n If you’re looking for a way to invest in this inflation-hedging asset, a gold IRA is one option for building up your retirement fund. <\/p>\n Opening a gold IRA with the help of Goldco<\/a> allows you to invest in gold and other precious metals in physical forms while also providing the significant tax advantages of an IRA. <\/p>\n With a minimum purchase of $10,000, Goldco offers free shipping and access to a library of retirement resources. Plus, the company will match up to 10% of qualified purchases in free silver<\/a>. <\/p>\n If you’re curious whether this is the right investment to diversify your portfolio, you can download your free gold and silver information guide today<\/a>. <\/p>\n Real assets for some back-pocket cash <\/p>\n Gold is a great way to complement a portfolio, especially one that’s diversified into income-generating assets, but it’s not the only way. <\/p>\n Rental properties have long been a proven source of steady, passive income for high-net-worth investors. It’s no wonder that real estate accounts for nearly 25% of the typical family office portfolio. But the time, effort and costs involved in managing and maintaining multiple properties prevent many from investing. <\/p>\n So, unless you’re a hedge fund titan or an oil baron, you’ve been shut out of one of the most profitable corners of the market. <\/p>\n However, real estate investing is becoming easier today than ever, with some investors revisiting it as they look for assets tied to tangible demand rather than hype. <\/p>\n Diversifying into fractional real estate <\/p>\n For example, mogul is a real estate investment platform offering fractional ownership in blue-chip rental properties<\/a>, which gives investors monthly rental income, real-time appreciation and tax benefits \u2014 without the need for a hefty down payment or late-night tenant calls. <\/p>\n Founded by former Goldman Sachs real estate investors<\/a>, the team handpicks the top 1% of single-family rental homes nationwide for you. Simply put, you can invest in institutional quality offerings for a fraction of the usual cost. <\/p>\n Each property undergoes a vetting process, requiring a minimum 12% return even in downside scenarios. Across the board, the platform features an average annual IRR of 18.8%. Their cash-on-cash yields, meanwhile, average between 10% and 12% annually. Offerings often sell out in under three hours<\/a>, with investments typically ranging between $15,000 and $40,000 per property. <\/p>\n Getting started is a quick and easy process. You can sign up for an account and then browse available properties<\/a>. Once you verify your information with their team, you can invest like a mogul in just a few clicks. <\/p>\n Scarcity assets beyond Wall Street <\/p>\n Some investors choose to take diversification a step further by looking beyond gold and real estate. Private equity is typically touted as another alternative asset, but it can be volatile. <\/p>\n That being said, there’s one alternative asset that’s scarce by design and is well regarded on the world stage, meaning that it has at least some resiliency against the wiles of U.S. markets. It’s also beloved by billionaires \u2014 regardless of whether they’re familiar with the masters. <\/p>\n And the asset in question? Post-war and contemporary art. <\/p>\n In fact, art has recently seen a record number of sales motivated by “connected” buyers” \u2014 or those motivated as much by their love of art as its potential for appreciation \u2014 according to the 2025 Artprice Report on the Contemporary and Ultra-Contemporary Art Market (12). <\/p>\n The art of investing in fine art <\/p>\n Until recently, this world was off-limits. Now, with Masterworks<\/a>, you can buy fractional shares in multimillion-dollar works by icons like Banksy, Picasso and Basquiat. While art can be illiquid and typically requires a long-term hold, it offers unique portfolio diversification. <\/p>\n Masterworks has sold 31 artworks so far, yielding net annualized returns like 14.6%, 17.6% and 17.8%.* <\/p>\n Moneywise readers can get priority access to diversify with art: Skip the waitlist here<\/a>. <\/p>\n *Past performance is not indicative of future returns. Investing involves risk. See important Regulation A disclosures at Masterworks.com\/cd.<\/a> <\/p>\n You May Also Like <\/p>\n Join 250,000+ readers and get Moneywise’s best stories and exclusive interviews first \u2014 clear insights curated and delivered weekly. Subscribe now<\/strong><\/a>. <\/p>\n Article Sources <\/p>\n We rely only on vetted sources and credible third-party reporting. For details, see our <\/a>ethics and guidelines<\/a>. <\/p>\n @TheDiaryOfACE\/ YouTube (1)<\/a>; Federal Reserve Bank of St. Louis (2<\/a>); Goldman Sachs (3<\/a>); NBC (4<\/a>); Visual Capitalist (5<\/a>); Bloomberg (6<\/a>); JPMorgan Chase (7<\/a>); Reuters (8<\/a>); BBC (9<\/a>); World Gold Council (10<\/a>), (11<\/a>); Artprice (12<\/a>) <\/p>\n This article provides information only and should not be construed as advice. It is provided without warranty of any kind. <\/p>\n","protected":false},"excerpt":{"rendered":"Moneywise and Yahoo Finance LLC may earn commission or revenue through links in the content below. 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