Concerned About Market Volatility in AI Stocks?
The recent DeepSeek AI frenzy triggered a staggering $600 billion loss in Nvidia stock, highlighting the extreme volatility in the AI sector.
Current market conditions remind me of the DOT COM tech bubble of 2000. AI is undeniably transformative—redefining how we work, driving massive productivity gains, and reshaping job markets. There’s no doubt that AI will continue to evolve and integrate into every aspect of our lives. However, the valuations of AI stocks today are sky-high, and we could see a correction similar to what happened when the DOT COM bubble burst. Just as investors believed in the tech boom back then, today’s market is banking on AI-fueled growth—perhaps a little too optimistically.
I fully recognize AI’s long-term potential, but in the short term, the market appears priced for perfection. A single-day $600 billion loss in Nvidia’s stock is a stark reminder of the risks and volatility that come with speculative trends.
I’m not predicting an imminent crash, but I do believe it’s a good time to evaluate what’s overvalued versus what presents real value today. As Warren Buffett teaches, value investors seek opportunities where assets are priced attractively relative to their intrinsic worth, rather than chasing the hottest trends.
Time to Diversify?
Many investors are currently sitting on heavily appreciated positions in AI stocks, crypto, and other booming assets. While it’s easy to ride the wave of high returns, the risk of a sharp downturn increases the higher something climbs. Markets tend to revert to the mean over time, making a disciplined approach to investing critical. The key is knowing when to take some chips off the table and allocate capital into more stable, undervalued opportunities.
However, selling during a bull run is tough. The excitement of continuous gains makes it feel like an asset could “go to the moon.” But ignoring risks and failing to rebalance a portfolio can be costly. That’s why experienced investors set rules for diversification, ensuring they take profits from overvalued positions and shift capital into areas offering more sustainable growth and income.
Real Conversations With Investors
Recently, I’ve had many conversations with investors who recognize the need to diversify but hesitate to take action. Fear of missing out (FOMO) keeps them holding on, waiting for an even bigger high—until suddenly, the trend shifts, and it’s too late.
For example, a good friend of mine holds a significantly appreciated Bitcoin investment inside a self-directed IRA. He knows he should diversify—his position is large enough to fund a comfortable retirement—but taking action is tough. He recently reached out, asking about options to move capital from crypto into cash-flowing real estate.
I introduced him to Tempo Income Fund, our most conservative option, which offers a predictable 10-13% annual return via quarterly distributions. I also mentioned our deep value buy deal, Waverly on the Lake, a 1,046-unit Class B property being acquired at $79,000 per door with in-place rents of $1,165. This deal is conservatively underwritten at a 9% going-in CAP rate, with a $25,000 per door renovation plan and an anticipated exit value of ~$160,000 per door in 4-5 years. With an initial 6%+ distribution yield and significant tax benefits, it’s an opportunity built on solid fundamentals rather than speculative hype.
My friend was excited about reallocating a portion of his Bitcoin into real estate for stable cash flow and long-term appreciation. Of course, emotional attachment to high-flying assets is real, and sometimes, making the logical move is easier said than done.
Final Thoughts
The AI boom is undeniably exciting, but history has shown that hyped markets don’t climb forever. Investors who take the long-term approach—diversifying into value-driven, cash-flowing assets—tend to fare better when markets shift.
Whether it’s AI stocks, crypto, or another speculative trend, smart investors take profits and reposition into undervalued opportunities before the cycle turns. The question is—will you be ahead of the curve or chasing the market when sentiment changes?
