AI Rally and Market Concentration (with Abeer Abu Omar)

There has been a concentration in AI stocks, particularly semiconductors in the US. What do you think about valuations?

Abeer Abu Omar

Alan Higgins

The rally has been extraordinarily concentrated in semiconductors, but historically this tends to broaden rather than signal a top. Valuations are extended but supported by a profits boom. The north star for equities is corporate earnings, which are very strong.

Earlier this year there was a broader rally. Intuitively concentration seems bad, but data shows it's not a typical sell signal.

Beyond the obvious US AI choices, what pockets of opportunity do you see?

Abeer Abu Omar

Alan Higgins

We remain risk-on. Tactical indicators like individual investor sentiment are average and put option appetite is extended, showing caution. The index is the winner—owning it means owning the AI winners.

We're always looking for tactical reasons to cut back, but the indicators don't give the green light yet.

Have geopolitical tensions impacted portfolio structures?

Abeer Abu Omar

Alan Higgins

We're always looking for hedges. Historically, geopolitical events cause a ~7% market fall with a V-shaped recovery. Tactically it's tempting to cut risk, but indicators don't signal that yet.

We're not geopolitical experts, we're investors. We give context to historical events.

You like gold and say it's systematically under-owned. Is there room for upside despite it not behaving like a haven recently?

Abeer Abu Omar

Alan Higgins

Gold has behaved strangely recently. We're being less tactical and more structural on gold. It's under-owned by family offices and sovereign wealth funds, who are more likely to allocate to bitcoin. Central bank buying provides support.

We prefer gold to interest rate risk as a portfolio hedge, but its behavior in this geopolitical conflict has been completely strange.

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