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Economic commentator Scott Galloway, or Prof G, is warning that with about 40% of the S&P 500 tied to AI-focused businesses, investors may need to reevaluate their risk exposure or prepare for a portfolio wipeout.
"There's no way they can justify these incredible valuations," Galloway said on a recent episode of The Diary of a CEO podcast (1). He also noted that one of the greatest threats to American AI companies is cheaper Chinese alternatives.
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He explained that the "majority of GDP growth over the last two years has come from AI," and that if that slows, the U.S. would plunge into a recession "immediately." The Federal Reserve Bank of St. Louis backs this up. The Fed found that 39% of total GDP gains in the third quarter of 2025 were driven by AI growth in areas such as software, R&D, information processing technology and data center construction (2).
This trend appears set to continue. Goldman Sachs estimates that AI investment spending could account for 40% of S&P 500 earnings growth in 2026, while major cloud companies are expected to collectively spend $674 billion on capital expenditures this year alone (3).
These sound like good things, but there's a problem: For decades, Americans could build wealth simply by buying broad index funds and waiting.
Now, in a K-shaped economy, with the wealthy at the top and the poor at the bottom, investors who haven't kept up with the times are increasingly exposed to market weak spots.
"If you're China," host Steven Bartlett said, "As leader now, you go, you know what? Give Americans cheap AI, and you'll kneecap their economy."
"One hundred percent. That's what I would do," Galloway agreed. "Founders get quite scared that there will be an economic crash in the next 12 or 24 months because of overinvestment in AI."
That's not to say that's China's game plan, nor is it the ultimate point of Prof G's argument.
Rather, it's the idea that Americans are heavily invested in AI with few alternatives to protect them from a recession.
This begs the question: if 40% of big tech stocks crash, and you've committed to a 60/40 investment split, is today's playbook really built for tomorrow's economy?
The original appeal of the S&P 500 index was to own a little bit of a lot of different companies. In a world where more and more top spots are banking on AI, that resiliency comes into question.
Today, the index is heavily concentrated in mega-cap technology firms like NVIDIA (NASDAQ: NVDA), Microsoft (NASDAQ: MSFT), Amazon (NASDAQ: AMZN), Alphabet (NASDAQ: GOOG), and so on — many of which are betting aggressively on AI infrastructure.
In fact, the top 10 companies in the S&P 500 now account for roughly 36% of the index's total weight, according to data from Visual Capitalist (4).
Many of these big companies have also invested in one another, a practice Bloomberg calls "circular deals" — where capital rotates among companies at the top of the pile (5). Although this has always, to some extent, been the case, parallels can be drawn to the period when telecom companies invested heavily in one another during the dot-com boom, leading to a web of dependencies.
Not everyone sees this situation as so bleak; however, Goldman Sachs notes that these deals are driven by "free cash flow and robust margins" from the hyperscalers themselves (6). This is slightly different from past bubbles where "tightening credit conditions" were the pin that led to the pop, according to the firm.
Galloway, however, argues that the over-representation of AI at the top of the financial food chain creates vulnerability for ordinary investors, especially those relying almost entirely on index funds for retirement savings.
"Either these companies' valuations need to be cut by 50 or 70%, or you need a massive destruction in the labor market," he said on the podcast.
In other words, the amount of money flowing into AI needs to eventually produce real economic returns, either through explosive revenue growth or massive cost-cutting efficiencies. The promise of efficiency increases is one thing. Fulfilling and quantifying that boost is another.
While enthusiasm for AI has helped push markets higher, the payoff may take longer than investors expect.
That's one reason some Americans are beginning to look beyond stock-and-bond portfolios altogether and towards something new: alternative assets (7).
Gold is one of the most commonly cited alternative assets — especially when it comes to preserving wealth in a downturn. Gold prices also surged to record highs last year (8), and central banks purchased more than 1,000 tonnes of gold for the third consecutive year in 2025 (9).
Although the precious yellow metal has since had a slight correction, it's still up about 45% year-over-year and, depending on your investing philosophy, now could be the time to buy the dip and diversify, too (10).
One way to invest in gold is to open a gold IRA with Priority Gold, an industry leader in precious metals that offers physical delivery of gold and silver. If you're unsure about gold, they offer a free information guide so you can do your own research before coming to a decision.
If gold sounds good to you, investors can buy physical gold and silver directly or hold precious metals through a self-directed gold IRA, which allows certain alternative assets to retain the tax advantages of a retirement account. And if you'd like to convert an existing IRA into a gold IRA, Priority Gold offers a 100% free rollover, as well as free shipping and free storage for up to five years.
To learn more, you can get a free information guide that includes details on how to get up to $10,000 in free silver on qualifying purchases.
Gold is a great source of stability in a portfolio while market volatility abounds. It's a great way to complement a portfolio, especially one that's diversified into income-generating assets.
Real estate investing is easier today than ever, with some investors revisiting it as they look for assets tied to tangible demand rather than hype.
Unlike tech stocks, multifamily housing generates income from something people consistently need regardless of market conditions: A place to live.
For accredited investors looking to diversify beyond public equities, Bonaventure offers access to institutional-grade multifamily real estate investments in high-growth markets with a minimum investment of $25,000.
Bonaventure focuses on income-producing apartment communities, offering potential tax advantages through structures like 1031 exchanges and UPREITs, allowing you to build passive income and wealth while the company manages the properties.
Some investors choose to take diversification a step further by looking beyond gold and real estate. Private equity is typically touted as another alternative asset, but it can be volatile.
However, there's one alternative asset that's scarce by design and is well regarded on the world stage. This means that it has at least some resiliency against the wiles of U.S. markets. It's also beloved by billionaires — regardless of whether they're familiar with the Impressionists.
And the asset in question? Post-war and contemporary art.
In fact, in 2025, art saw a record number of sales motivated by "'connected' buyers" — or those motivated as much by their love of art as its potential for appreciation. Over 146,000 pieces sold at auction, according to Artprice (11).
Fine art is an asset class historically associated with ultra-wealthy collectors and institutional investors, but it's becoming increasingly accessible to everyday investors through fractional ownership platforms like Masterworks.
Masterworks is offering a single investment that combines blue-chip art with other scarce assets, such as gold and bitcoin, that have historically moved independently of equities and of one another.
The result is a more balanced, all-weather approach to alternative investing. In fact, this model would have outperformed the S&P 500 by 3.1x from 2017 to 2025.*
By leveraging access to museum-quality artwork alongside other uncorrelated assets, the strategy aims to enhance diversification while still pursuing meaningful appreciation.
Discover how diversifying with this strategy can strengthen your portfolio for the years ahead.
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The Diary of a CEO, YouTube (1); Federal Reserve Bank of St. Louis (2); Goldman Sachs (3); Visual Capitalist (4); Bloomberg (5); J.P. Morgan (6); Reuters (7); World Gold Council (8); Online Gold (9); APMEX (10); Artprice (11)
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