Market pros are recommending this investing strategy as fears of an AI bubble grow

• Anxieties around a possible bubble forming in AI have risen steadily all year.

• There’s a strategy market pros are recommending for investors worried about the AI party suddenly stopping.

• A barbell portfolio balances high- and low-risk assets to offer investors downside protection.

The barbell strategy. It’s not a gym bro thing, but rather, it’s an increasingly common bit of investing advice from some of the market’s top strategists amid fears of an AI bubble.

It refers to an investing approach that involves investors splitting their portfolio largely between high- and low-risk assets. The idea is that one side of the portfolio can offer downside protection if the other underperforms, giving investors a way to cash in high-return, more speculative investments while hedging risk.

More strategists have been pushing the recommendation as they eye the risk of a stock bubble in the market’s highest-flying stocks.

The S&P 500 has hit record after record this year, and around half of the index’s gains over the past five years have been driven by growth stocks, according to an analysis from Citi.

In a recent note to clients, the bank pointed to the S&P 500’s historically high valuation and recommended a barbell portfolio split between growth and cyclical stocks.

“The critical components to this are twofold. One is confidence in the magnitude and duration of AI-related growth tailwinds to support Large Cap Growth. The other is either soft landing or signs of improving economic activity will manifest in Value and SMID,” strategists wrote, referring to small- and mid-cap stocks.

Bank of America suggested a similar type of portfolio in a note last week.

“Bubbles=booms=best played via barbell of bubble (AI) and cheap cyclical assets,” strategists wrote, pointing to investments like commodities.

“Price action, valuation, concentration, speculation all frothy and lead indicators of inflation inflecting higher,” they added of the risks to stocks.

Recommendations for other types of barbell portfolios have also started to circulate. Ruchir Sharma, the chairman of Rockefeller International, recommended a barbell portfolio largely split between AI and US stocks and foreign non-AI stocks.

“On one hand, if you want to own AI, and you want to own American, that’s one side of it,” Sharma said on CNN’s “Quest Means Business” program this week. “But to own everything else in the world, to diversify outside of both America and the fact that America is overly exposed to AI,” he said.

Sharma has been warning about the risk of a stock bubble, particularly in US markets. In the past, he’s speculated that US stocks are caught in the “mother of all bubbles.”

David Rosenberg, a top economist and another prominent stock bear, detailed his recommendation for a bond-bullion barbell portfolio, which is largely overweight gold and US Treasurys.

That portfolio blend is up around 25% year-to-date, he said in a note last month, outpacing the S&P 500’s 14% return.

Most investors look like they’re underweight in US Treasurys and gold, Rosenberg said. US markets, meanwhile, look like they’re in a “classic equity bubble,” he added, pointing to the S&P 500 CAPE Multiple, one gauge that measures how highly stocks are valued.

“The bond-bullion barbell remains a useful corrective,” Rosenberg wrote.

The frothiness of markets in 2025 has given rise to lots of recommendations for investors to bolster their portfolios against bubble risks.

A BNY executive this week said that he recommends a 50/30/20 split between stocks, bonds, and alternatives. Meanwhile, Vanguard said earlier this year that it thinks investors should stick 70% of their money in bonds, bucking the traditional 60/40 recommendation for stock and bond allocations.

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