The top economic adviser of a $1.9 trillion firm says the market’s infatuation with AI has faded.
In a new CNBC interview, Mohamed El-Erian, chief economic adviser at Allianz, says the tone of the market has shifted sharply from last year’s broad AI-driven enthusiasm.
“So I would say we’re in a different market. We no longer have the love affair with AI that we had last year. This is a market defined, I think, and will continue to be defined by three words: volatility, dispersion. You’re going to see a lot more dispersion and fragmentation.”
He says investors should rethink how they build portfolios in this new environment, while the pullback creates fresh openings in AI-related companies that may have been dragged down by weaker peers. El-Erian says investors should pick oversold stocks that have solid fundamentals.
“And I would build my position bottom up, not top down. And I would certainly be picking up names that were impacted by this theory of the market for lemons, meaning they overshoot on the way down because they end up having a one technical correlation with names that are weaker.
So I think this is a massive opportunity for stock picks, particularly in the AI world and in the world impacted by AI. So for me, this is a world in which people should be building their portfolio bottom up and picking up some really good bargains at this point.
It doesn’t mean you buy the sectors across the board. It means you buy those with strong balance sheets, strong business models and strong leadership.”
El-Erian’s message suggests the next phase of the AI trade may be less about broad momentum and more about selective stock picking in a market defined by volatility, dispersion and fragmentation.
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