Apollo's Chief Economist Proposes a New 60/40 Strategy for Investing in the Age of AI

A classic investment portfolio, in which 60% of capital is allocated to stocks and 40% to bonds, no longer provides sufficient diversification amid the artificial intelligence boom, according to Business Insider. Instead, investors should aim for a mix of 60% AI-related assets and 40% assets not dependent on this technology, according to Apollo’s chief economist, Torsten Slock. In his view, this strategy will better protect the portfolio.

In recent years, market participants have been overly focused on a single risk factor, explains Slock. Whereas diversification used to mean spreading investments across different sectors and asset classes, a significant portion of the market now depends on the success of AI, the economist notes. “AI is literally everywhere in your portfolios and is extremely important for the economy’s outlook. Therefore, investors need to consider what will happen if AI turns out to be more successful than expected—or, conversely, fails to meet expectations,” Slock warned.

He pointed out that 40% of the S&P 500 index’s weight is currently concentrated in the ten largest companies by market capitalization. Among them, the only one with no connection to AI is the investment fund Berkshire Hathaway. This means that the index no longer represents a diversified set of stocks and reflects investors’ views on the future development of AI, according to the Apollo economist. A similar situation is unfolding in the debt market. The largest technology companies are actively raising funds to build data centers and develop other AI infrastructure, which makes investors dependent on the same factor through both stocks and bonds, Business Insider notes.

And here’s another fact that Slock pointed out: whereas venture capital used to be directed primarily toward the development of pharmaceuticals and biotechnology, about 87% of it now goes to AI projects.

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