Is the AI wave coming to an end? How should investors adjust their asset allocation with caution?

As the U.S. stock market continues to hit new highs and valuations keep rising, investors have recently turned to undervalued SeaGate and Micron, which has raised concerns among analysts that this behavior, typical of bubble periods, may be a sign of a late-stage rally. How should investors remain vigilant and adjust their asset allocation? Here are the suggestions from several wealth advisors interviewed by Bloomberg.

Investors turn to SeaGate and Micron, has the AI wave reached its end?

The S&P 500 index has been consistently reaching new highs this year, with people filled with hope for the future of high-tech artificial intelligence, but the latest hot topic in the stock market has been the old-school companies in the tech industry.

SeaGate Technology, a producer of computer hard drives, soared by 156%, becoming the best-performing stock in this year's S&P 500 index. Its competitor, Western Digital Corp., ranked third with a 137% increase. The largest memory chip manufacturer in the United States, (Micron Technology Inc.), ranked fifth after the company recorded a historic 12 consecutive trading days of gains, bringing its increase to 93% for 2025.

These companies, which were usually overlooked and established before Zuckerberg and Sam Altman were born, are now skyrocketing, indicating that the sustained demand for artificial intelligence computing equipment is benefiting many enterprises. However, many analysts believe that such behavior is characteristic of a bubble period and that it is the "later stage of the cycle."

SeaGate, Western Digital, and Micron Technology are often among the cheapest stocks in the S&P 500 index due to their cyclical characteristics and relatively few followers in the investment community. According to Bloomberg data, at the beginning of 2025, Western Digital's price-to-earnings ratio was less than 6 times expected earnings, while SeaGate and Micron's price-to-earnings ratios were around 10 times. Although valuations have risen since then, the trading prices of these three stocks remain below the S&P 500 index, which has a price-to-earnings ratio of 23 times expected profits over the next 12 months.

The S&P 500 continues to hit new highs, how should investors position themselves?

As US stocks continue to reach new highs and valuations keep rising, the resilience of the US stock market is both astonishing and concerning for many investors. After a return rate of about 25% for two consecutive years, the S&P 500 index has risen by about 12% this year, up more than 30% from its low on April 8. Despite facing tariff turbulence, inflation concerns, significant policy shifts in Washington, geopolitical conflicts, increasing government debt, and worries about the independence of the Federal Reserve, the strong performance persists.

As the market continues to reach new highs, how should investors remain vigilant and adjust their asset allocation? Here are the suggestions from several wealth advisors interviewed by Bloomberg.

Defend with stable cash flow

Michael Contopoulos of Richard Bernstein Advisors believes that the market has already moved ahead! They are trying to protect and position their portfolios to cope with the situation where the Federal Reserve cannot cut interest rates as significantly as the market expects, profit growth is weaker than the market anticipated, and inflation is higher than expected.

Strategy: Seek stocks that can maintain stable cash flow during both economic booms and downturns.

Suggested Targets: WisdomTree U.S. Quality Dividend Growth Fund (DGRW), WisdomTree U.S. Small Cap Quality Dividend Growth Fund (DGRS), and WisdomTree International Quality Dividend Growth Fund (IQDG).

Bet on Bitcoin, Aave, Solana

Ophelia Snyder, co-founder of 21Shares, continues to be optimistic about Bitcoin, as well as Aave and Solana.

Recommended targets: Bitcoin ETF "IBIT" and "ARKB", Solana futures ETF "SOLZ" or directly holding cryptocurrencies.

Bet on the energy sector

Envestnet Chief Investment Officer Dana D’Auria suggested investing in the energy sector, noting that besides the high demand for energy driven by AI, the population growth and rising living standards in developing countries also depend on energy.

Recommended target: Energy Select Sector SPDR Fund (XLE) or Invesco S&P SmallCap Energy ETF (PSCE).

Is the AI wave coming to an end? How should investors be vigilant and adjust their asset allocation? Originally published in Chain News ABMedia.