Is Wall Street In An AI Bubble: Expert Weighs In And Explains What You Should Do

Forbes

Aneri Jambusaria, CFP ®, Chief Wealth Officer at LPL Financial, joined Maggie McGrath on "Forbes Talks" to discuss the economy and the possibility of an AI bubble.    Subscribe to FORBES: https://www.youtube.com/user/Forbes?sub_confirmation=1  Fuel your success with Forbes. Gain unlimited access to premium journalism, including breaking news, groundbreaking in-depth reported stories, daily digests and more. Plus, members get a front-row seat at members-only events with leading thinkers and doers, access to premium video that can help you get ahead, an ad-light experience, early access to select products including NFT drops and more:  https://account.forbes.com/membership/?utm_source=youtube&utm_medium=display&utm_campaign=growth_non-sub_paid_subscribe_ytdescript  Stay Connected Forbes newsletters: https://newsletters.editorial.forbes.com Forbes on Facebook: http://fb.com/forbes Forbes Video on Twitter: http://www.twitter.com/forbes Forbes Video on Instagram: http://instagram.com/forbes More From Forbes:  http://forbes.com  Forbes covers the intersection of entrepreneurship, wealth, technology, business and lifestyle with a focus on people and success.

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00:00Hi, everyone. I'm Maggie McGrath, Senior Editor at Forbes. As investments surge in AI, concerns

00:11among the investor class are growing. Is there a bubble in AI? Could it hit the U.S. markets?

00:18And if so, what would the financial effect be? We have one story on Forbes.com that estimates

00:24an AI bubble burst could swipe $40 trillion from the Nasdaq's market capitalization. What does that

00:32mean for investors? Joining us now is LPL Chief Wealth Officer Aneri Jambuceria. Aneri, thank you

00:39so much for joining us. Thanks for having me. So before we started recording, you told me that

00:45you and your team messaged on weekends about what is going on with AI. So can we zoom out and talk

00:51about how you as Chief Wealth Officer of a financial institution are looking at this space?

00:57Yeah, absolutely. Well, so as contacts at LPL, we serve over 30,000 independent and financial advisors

01:03and over 7 million Americans to invest and save towards their life goals. And so that means that

01:10anytime there's a development that's happening in the markets, including the AI trend that we're seeing

01:15right now, it's really meaningful for our clients. And it's an area where we're delivering advice and

01:21guidance to our clients. You know, in the AI space specifically, you know, I guess I'll start

01:26just by stating the obvious. AI is incredibly transformative. It has the potential to change

01:32every job, every business, every company that's out there. And that's a big reason why we're seeing

01:38it really take off, especially in the public markets. So if you look at the stock market in

01:44particular, you know, a lot of a lot of the stock market has been concentrated in just a handful of

01:50names, right? And they tend to be more tech AI forward companies, especially in the last couple

01:57of years. Those are really the firms that we've seen really grow in their value. Just to bring this

02:02to life a little bit, you know, if you look at the S&P 500, that's a really diversified set of stocks

02:09that represents some of the largest companies. Only kind of less than 10% of the names are AI

02:16companies, but they represent about 50% of the market cap on the S&P. Another interesting color

02:22point, if you think about, you might hear about the Mag7. So this is like the seven kind of large

02:27tech and AI companies. Think names like Apple and Microsoft and NVIDIA. That's up over 60% over the last

02:34two years. And really what we see is happening is that these companies are demonstrating an

02:41opportunity for that really transformative power of AI. They're also demonstrating that there's really

02:47high capital requirements to achieve that potential. So we've all heard about things like data centers and

02:53really specialized chips and electricity. And these are all kind of like the raw ingredients that are

02:59needed to make AI work. And because the potential for transformation is so impactful, the capital

03:05markets have been willing to give these companies an outsized level of investment. And so that's a

03:11part of the reason why you're seeing those names really take off. And for many of us in our personal

03:16portfolios, we're seeing our investments and our retirement accounts increasingly concentrated in those

03:22names. Now, when you say the capital markets are providing investment, how much of the money in the

03:28market is an investment, an actual investment versus a loan. And what I'm getting at is how much

03:34speculation is being priced into the market. Because if we think back to 2008, the debt that home

03:42borrowers were taking on, that ended up fueling a large portion of that financial crisis. Are we in a

03:47similar situation where companies are borrowing money to build data centers or investors are becoming

03:53over levered, perhaps even borrowing money to invest money? How do you look at the debt situation in

04:00the United States right now? Yeah. So, you know, at a high level, I'll just start by saying we don't

04:05believe that we're in a bubble today. But we do see that the markets are, we describe it as out of

04:11equilibrium. So let me explain that to you. Anytime that the markets are out of equilibrium, it basically

04:15means that we're seeing data points that don't quite jive with each other. And right now, you know, we see the

04:21economy growing at a pretty measured pace. But then we're seeing these outsized valuations. And again,

04:27that momentum play really coming through in terms of valuations in the stock market, right? The markets

04:33go in and out of equilibrium all the time, we fully expect that to kind of return back to return back to

04:39being in sync. That being said, like, you know, whenever you talk about the word like a bubble, right?

04:45Are we in a bubble? We think of bubbles as typically more speculative in nature, right? And the analogy that I

04:50like to use is the emperor's new clothes, that Hans Christian Andersen fable, right? Where you think

04:55there's something that exists, and then you find out one day, magically, it doesn't exist, right?

05:00So that's the level of speculation that we typically see in a quote-unquote bubble. Again, we continue to

05:06feel like the fundamentals for AI are very strong. That being said, I think I mentioned this to you

05:11before we started recording, you know, for me to say that statement, you know, we're not in a bubble,

05:16it's a harder statement for me to make today than it was a few weeks ago. And there's two,

05:20I'd say, like, watch out. So we have our eye on here at LPL. The first is just making sure that we

05:27see the economic pull through of the benefits of AI. So when you look at the way that AI is really being

05:32used today, it's definitely been, it's been great in terms of augmenting people's work, right? It makes

05:39all of us more effective at the things that we're doing. But it hasn't really transformed work at scale

05:45to the extent to really be able to pull through those economic benefits that we believe the

05:50markets are counting on. And the analogy I'll use is like, you know, I use chat GPT, it helps me tell

05:55better jokes, but it's not like I employed a joke writer before, right, that I don't need. So there's

06:01definitely additional economic impact that we have not yet seen pull through from AI and productivity

06:07benefits that certainly the markets are pricing in that we'd like to see come through. The other watch

06:13out and you kind of alluded to this is the nature of the deals that have been announced, especially more

06:18recently, they feel a little insular in terms of how they're coming about in the AI space. And what I mean by that

06:25is that we're not seeing a really broad, diversified set of companies really partake here. It's largely call it a

06:33dozen firms in the AI space that are kind of investing in one another, right? The OpenAI deal with AMD, some of the recent deals on

06:41data centers, right? It tends to be a small group of firms that are making investments with each other. And in

06:47some cases, they're investments based on the prospect of future revenue, right? And you kind of alluded to

06:53this, right? Like in prior financial crises, we have seen there be situations where you have a small set of

07:00insiders with, you know, limited transparency and a lot of interconnectedness. And those were some of the

07:06conditions for some financial crises that we've experienced in the past. Again, nothing to say that,

07:14you know, we're in that type of situation today. We certainly don't see that. But we are going to be

07:20continuing to keep an eye on it. And specifically, like, you know, what we'd love to see, first of all,

07:24is some more of those broader economic benefits pull through around AI, to really validate the use case,

07:31to really stand up those potential revenue streams that are currently assumed as part of some of these

07:37deals, and also just seeing a broader set of firms participate in some of the deal making that we're

07:44seeing in this space. What's interesting to me about how you started that answer is that you said

07:49your ability to say that we're not in a bubble has weakened in the past few weeks. And I was expecting

07:57when you started that sentence both now and when we were talking before the recording to say like

08:01over a year, over several years. What is it that has happened in the last few weeks that has adjusted

08:07the way you look at this space? Is it the deals that have been announced or is it softness elsewhere

08:12in the market, either the labor market or the actual stock market? Yeah, it's a great question. So

08:17again, from an overall economic standpoint, our view is really unchanged in recent weeks. So there

08:22haven't been kind of recent economic data points that have suggested that, you know, we're in any

08:27kind of a different situation. It really is more of the former of those insular deals that we're

08:32starting to see. Again, just it's the type of thing that rhymes with situations that have not been great

08:38in the past, not to say that this is one of those situations, but it's definitely the kind of development

08:43that causes us to just kind of, you know, drive a little bit slower, think a little bit more carefully,

08:47and just really pay attention to what's going on. And of course, if you Google, as I have in

08:52preparation to talk to you, you see headlines that reference dot-com bubble, 1929. These are phrases

09:01and terms that can set off alarm bells in the minds of investors. What would you say to investors like

09:07me who see this and think, yikes, maybe I should adjust my asset allocation. Maybe I should remove some

09:13of the risk I'm being exposed to right now. Yeah, first of all, I completely empathize. I think

09:19for folks who are probably like us who are in accumulation phase, we're responsible for our own

09:24financial security, right? So when you see that number in your retirement portfolio jump up and

09:28down and you see those headlines, it can be really easy to want to take chips off the table. And then

09:33even for someone who's a retiree who has, you know, a fixed budget, it can be concerning, right,

09:39around, hey, is my money really going to last me long enough given some of these developments?

09:44That being said, I would really caution against making any significant changes to your investments

09:50at this stage. If you take a step back and think about other transformational technologies that we've

09:55seen, so think, you know, electricity in the late A300s or even the advent of the internet, right?

10:02These have all pulled through to long-term be really advantageous for the economy,

10:07advantageous for the stock market, and advantageous for people's personal investments over the long

10:11run. So especially for your kind of long-term oriented goals and planning, we have all the

10:17reason to believe that there's going to be a pull through of some of these, the trends and benefits

10:23from these, from this technological change. And I think the inverse is unfortunately true as well,

10:29is that we see time and time again that investor, retail investors specifically,

10:34tend to underperform the broader markets. And it's because we take chips off the table during times

10:39like these, right? We get concerned and nervous, and we're concerned about losing, and then we're

10:44not able to kind of put our money back in at the right time. You know, market timing is one of those

10:49things where it's just really challenging, especially for a retail investor to be proficient in. So we

10:55would really caution against that. Instead, I would say, again, if you're concerned about what you're

11:01seeing in the headlines, I would suggest, you know, first and foremost, it's a great time to speak

11:06with a financial professional. You know, we certainly believe at LPL that working with a trusted

11:12financial professional is a great way to stay aware of what's happening in the markets, have a really

11:17trusted partner to help you through some of that decision making, and in times like these really

11:22help you to make the most prudent decisions for your long-term interests. It's also a really great

11:29time, and especially in conjunction with a financial professional, to consider diversification,

11:33right? Diversification's always been something that we've talked about in wealth management,

11:37but I'd say it's becoming particularly important now, especially as, you know, some of the contexts

11:42are changing around what diversification really looks like. When I started my career, it looked like

11:48a 60-40 portfolio between equities and fixed income. Today, it actually looks more like one that's

11:54evenly split between equities, fixed income, and alternative investments. And so, alternative

11:59investments in particular are an asset class that have become increasingly available and applicable

12:04to people across the entire wealth spectrum, and we see they have tremendous diversification benefits,

12:10as well as tremendous revenue, as well as tremendous return benefits as well. And so,

12:15especially if you're concerned about some of the movement of the, call it the publicly traded equities

12:21in your portfolio, alternative investments and access to private markets might be a great way

12:26to diversify that. And again, that's something that a financial professional can definitely

12:31help walk you through how that could work. When you say alternative investments, does that

12:36include commodities like silver? Because we've been seeing headlines over the course of just the past week

12:42or so about the price of silver surging to record highs this month. Do metals factor into the advice

12:50that you give to your investors? Yeah, it's a great question. And look, certainly silver, we've seen

12:55certainly grow its value as well as gold as well. You know, at a high level, you know,

13:00we view alternative investments as this broad portfolio. It's inclusive of private markets

13:05investments like private equity, private credit, hedge funds, as well as to a smaller degree,

13:10you know, commodities as well. You know, I'd say high level, we certainly see there being an opportunity

13:16to grow many individual investors allocation towards alternative investments. However,

13:21I would caution against a commodity exposure that's more than just a few percent in your portfolio.

13:27Over the long run, we think that you're better off with more of a diversified set of exposure to

13:31alternatives that's more focused on the private markets. Now we started this conversation talking

13:36about AI and the popular question these days is, is there an AI bubble? But other factors that can affect

13:43the way stocks perform include the unemployment rate, inflation, how much are you looking at those

13:48economic indicators and how worried are you about them? Because especially when it comes to the

13:53unemployment rate, it feels to me from the statistics versus anecdote, I know anecdotes are not statistics,

14:01but we hear in our reporting of folks who are having trouble finding jobs, and it seems like it's taking

14:06longer for those stories to be reflected in the data. So I've been wondering how lagging our unemployment

14:14rate is compared to what, again, our reporters are uncovering as they speak to everyday folks who are

14:19having trouble finding jobs. What's your perspective on some of this data? Yeah, it's a great question.

14:25So look, it kind of gets back to what we were speaking about earlier and that we definitely see

14:29the markets being out of equilibrium with the economy overall, which again, we continue to feel like the

14:34economy is in pretty solid shape. We are continuing to see it continue to grow and strengthen over time,

14:41but I'd say at a more moderate pace versus what we're seeing in the markets. Certainly to your point,

14:47you know, we're continuing to watch the employment figures come through, especially right now being in

14:52a government shutdown, the data may not be coming through at the rate or pace at which we're accustomed

14:57to. So we're certainly looking for what are some additional data sources that we can include to make sure

15:02that we're getting a holistic picture of what's happening in the economy.

15:07Now, I'd be remiss not to talk about the great wealth transfer. As Forbes women editor, we've talked

15:12about this in our channels a lot about how much money women intend to come into in the coming years,

15:19decades, et cetera. Can you talk about the dollar figure that you see women potentially coming into and

15:26how, if at all, that should affect the way we as an investor class approach our investment decisions?

15:33Yeah, absolutely. Well, look, the concept of the great wealth transfer really stems first from

15:40this idea of demographics, right? So if you look at it, the majority of wealth in the U.S. is

15:44concentrated in the boomer population. And, you know, that generation is eventually going to have to

15:51transition that wealth. The way that we see that it's going to happen, though, is twofold. The first

15:56transition is typically going to be to a surviving spouse. And demographics being what they are,

16:02oftentimes it's a male passing away and the woman who is inheriting the wealth. And then that woman,

16:10again, life expectancy being what it is, may live for another decade or two and really control that

16:17wealth before the next generation then takes over the wealth. And so it's kind of this like two-step

16:23process. I do believe, though, that women are going to play a key role in each of those two steps. So in

16:28that first step, it's really about this kind of high net worth matriarch taking over control of an

16:35increasingly increasing portion of wealth. Again, we estimate close to $2 trillion is going to change

16:40hands over the next decade. And that's going to put women in particular in a position where they could be

16:46controlling the majority of wealth in this country, which, again, is unprecedented and certainly has

16:51not happened before. I think we've all heard the stories of women taking over control of the

16:58wealth management portfolio after their husband passes away and firing their financial advisor and

17:03finding somebody who's a better fit for them and for what their goals are. And certainly we know that,

17:08especially with that demographic of a high net worth matriarch, they may have different priorities,

17:13whether it's charitable giving or legacy planning. In many cases, they want adult children to be

17:19involved as well in the decision making and conversation. So that presents a new and really

17:23interesting challenge for wealth management in terms of how to serve this need. The next transfer,

17:29of course, is going to be to the younger generations. And again, we're continuing to see women play

17:37an increasing role as it relates to management of the household wealth. I think I saw a statistic

17:42recently that women are now close to 50 percent of households in terms of either being the sole

17:47breadwinner or, you know, making either at least as much as their spouse. And so increasingly women

17:54are going to be in a decision making role as it relates to both their own wealth as well as their

17:59inherited wealth. So certainly a lot of opportunities there in terms of making sure that women are at the

18:05table in terms of the discussions, the driving the strategy, the decision making for wealth,

18:10as well as meeting some of the unique needs of women, including things like career gaps and planning

18:16for, you know, time spent away from earning income, which again, historically in a more traditional

18:22household has not always been something that was that was a top consideration from a planning perspective.

18:27So certainly a lot of opportunities for us to continue to evolve to better serve women

18:32across the across the wealth spectrum. And certainly this great wealth transfer is going to

18:37play a big role in in in forcing us to figure this out, forcing us to figure this out.

18:43That hints at a potential risk here. I'm wondering, it sounds like a tremendous economic opportunity,

18:50but what are the potential downsides? Are women unprepared or is the advice given to women

18:57not yet calibrated to our lifespans? Is there risk in accumulating this wealth and then maybe not

19:04growing it or having it take a wrong turn in some way? Yeah, it's a good question. I actually,

19:11I'm not as concerned about this shift in terms of quality of advice. First of all, you know,

19:16women tend to be more open to trusting and working with a financial professional than men. And so that,

19:23first and foremost, is going to put them in a really advantageous position in terms of making

19:27really thoughtful, quality decisions. Women also have more of an interest towards holistic wealth

19:33management. So they're interested not just in what the returns look like for their portfolio,

19:38but also in terms of what the their broader picture looks like from an estate and tax planning

19:43perspective. So I actually think that this shift is going to be really beneficial. And I think women

19:49are incredibly well positioned to be able to succeed as the driver of wealth.

19:54Now we're talking in October, it really has been a rollicking year for the markets. I think if I had

20:01spoken to you in April, we would have been taking a much more somber tone based on how the markets were

20:06reacting to the tariffs enacted by the White House. Markets generally for year to date, S&P, NASDAQ,

20:15they're up at this point. I just checked the year to date returns as of this morning. There's more

20:22green in those year to date numbers than I would have predicted in April. So as you look at the last

20:28few months of the year, as you look at what people might be doing for end of year financial planning,

20:32what are your projections and what is your advice?

20:35Yeah, it's a great question. And maybe just to put some of that into context, right? So earlier this

20:41year, when the tariff shock fell, the markets dropped by like 11%. But I think at this point,

20:46we're like the S&P is up 7% on the year, right? So to your point, we've definitely kind of

20:52turned the tide there. The other interesting development, especially from a tax planning

20:56perspective, is the recent tax bill. So the OBBBA has made certain tax provisions permanent. It's

21:05also introduced some changes for 2026 and beyond. So certainly, as investors look towards their year

21:12end tax planning, I'd say the similar stories apply around some of those things we think about towards

21:17the end of the year. So first of all, it's always around tax loss harvesting, right? So again, harder to

21:21find those losses in a year like this year. But certainly, if you have them, considering using

21:26that opportunity to offset gains. End of the year is also a great time. It's giving season. And so

21:32great time to consider charities or other causes that you want to contribute to. Appreciated securities

21:39are always a great way to be able to meet those charitable needs. In addition, there are some changes to

21:45charitable contributions that are coming into place through the OBBBA that we think may cause

21:51investors to think about giving even more this year than maybe they would have otherwise. So

21:56always a good time this time of year to check in with your tax professional, check in with your

22:01financial professional, and just take care of some of those items. Maybe the last thing I'll share is

22:06like, you know, it's always a good time of year to make sure that you're taking advantage of those tax

22:11exclusions. So think about the gift tax that we are permitted to give to others contributing to 529

22:19plans. I think of this time of year as like my financial housekeeping time of year. So I'd really

22:25encourage you to think about that as well. And just make sure you checked everything off of your

22:28financial to do list. So financial housekeeping time of year, and what are your final words on the

22:33market and how you might expect it to go? And maybe final words of advice to again, folks who might be a

22:39little worried when they see words like AI bubble in headlines. Yeah, again, I long term, you know, we

22:45continue to see the the markets and the economy, you know, we see a strong and I would encourage

22:52folks, investors to really just, you know, ride the wave a little bit, right. So like, there's going

22:57to be some ups and downs, there's going to be some volatility, that's normal, this is always what,

23:02you know, what we see happening in the markets. But for the long term, just keep your long term goals

23:07in mind, and be able to tune out the noise for what it is that you're really solving for, which in many

23:12cases are things like a retirement in your second home, or maybe it's your kid's education. Those

23:17are things that don't fade, that don't fade the way that market trends do. Aneri Jambuceria,

23:24thank you so much for joining us, Chief Wealth Officer for LPL Financial. We really appreciate

23:29your time and your insight. Thanks so much.

23:42So

23:59you

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