One of Wall Street’s most influential investors says the stock market’s biggest winners are being powered by real money, not mania.
In a new CNBC interview, BlackRock Chief Investment Officer Rick Rieder dismisses talk of an AI bubble, arguing that the largest US companies are generating unprecedented levels of cash that justify capital valuations.
“The amount of cash on hand that’s just got a naturally and just normal earnings savings that have to come in, and the buybacks. I mean we’re witnessing something that is history in terms of these companies throwing off earnings.”
He notes that the free cash flow produced by tech giants allows them to invest in innovation and still return capital to shareholders at scale.
“And by the way, we’re talking about is an AI bubble or is this a bubble? I mean, I’m actually going through a presentation where I’m presenting that the cash flow these companies throw off, the free cash flow they throw off, that allows them to do CapEx (capital expenditures), allows them to invest in R&D (research and development), but then buy back their stock. So you’re actually reducing your book equity outstanding and driving your stock higher. It’s pretty unbelievable.”
While Rieder sees AI-driven growth as fundamentally supported, he warns that investors risk becoming too comfortable with concentrated portfolios.
“We talked about in California, the idea around complacency. Complacency is high. And, you know, you look at your portfolio today, by the way, you look at Apple, you look at other names, they become larger and larger portions of your portfolio. You have to be thoughtful about that.”
He adds that despite low volatility, investors should still seek downside protection.
“And how do you manage the downside? The nice thing is the volatility in the markets is pretty low that you can buy some downside protection.”
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