How investors are protecting themselves from the AI ​​hype

Artificial intelligence has been a dominant market theme for the past two years, but even the strongest trends can show signs of fatigue. This month, the technology segment most closely linked to AI weakened slightly, while healthcare, materials, financials, and energy led the S&P 500. Many investors are therefore asking a simple question:

“How do you stay invested in the long-term AI story without being too exposed to short-term fluctuations?”

Below is an easy-to-follow explanation of what steps investors are taking today, why these approaches are gaining popularity, and what risks are worth keeping in mind.

#1 Rotation towards stability and old economy leaders

With the Nasdaq 100 down 1,3% month-on-month and the Dow up around 2%, investors are increasingly shifting capital to market segments with more stable earnings and less sensitivity to AI sentiment.

Where do the funds flow?

This month the best results are achieved by:

• Healthcare (+5,9%)
• Materials (+3,3%)
• Financial companies (+2,5%)
• Energy sector (+2,3%)
• Consumer staples and real estate (both segments in the black)
• Utilities (slightly positive)

Why do these sectors attract capital?

These sectors typically offer:

• Stable profits, resistant to business cycles and cash flow
• Lower valuations compared to the technology segment strongly associated with AI
• Greater predictability of results
• Less dependence on market sentiment
• Lower volatility, allowing them to act as portfolio stabilizers when AI leaders experience increased volatility

What is this rotation all about?

Instead of retreating from technology, investors are rebalancing AI-heavy portfolios by adding exposure to sectors with clearer demand drivers, more predictable fundamentals, and affordable valuations. This allows them to maintain exposure to AI's long-term story while mitigating the risk of short-term volatility.

Risks to keep in mind:

• Defensive and old economy sectors could lag significantly if the technology segment rebounds sharply
• Global slowdown in growth could hurt industrial, materials and banking sectors
• The energy and materials sectors are exposed to volatility resulting from cyclical commodity prices.
• Excessive rotation reduces exposure to long-term AI-driven structural growth

#2. Portfolio-level adjustments to reduce concentration risk

Some investors hedge their exposure to AI through portfolio construction rather than through individual asset selection. The most common approaches include:

• Equally weighted indices: limit concentration in the largest companies
• Return to quality: they favor companies with stable profits and strong balance sheets
• Limiting variability:  smoothes portfolio changes during periods of increased volatility

Risks

• They may lag behind during strong growth driven by the technology sector
• Prices of low-volatility assets may rise as more investors avoid volatility

#3 Rotate to technology with better pricing support

Not all technologies face the same valuation pressures. Investors are selectively investing in technologies rather than abandoning them.

Investors are turning to areas with clearer returns and less AI hype, such as:

• Providers of infrastructure and industrial solutions driving the expansion of data centers.
• Energy and utilities sector benefiting from the growing demand for electricity.
• Asian technologies and semiconductors, often with more reasonable valuations
• Japanese automation and robotics, supported by trends in capital expenditure and reshoring

These segments offer a way to stay connected to structural trends, digitalization, capex cycles, healthcare innovation, and energy demand, without the valuation risk associated with a few AI giants.

Risks

• Sector rotation may lag during the technology-driven rally.
• Growth-sensitive sectors could weaken if the US economy slows.
• China and Asia face regulatory and sentiment risks and may be more sensitive to export cycles.
• Currency fluctuations can impact returns for global investors.
• Rotation within technology still leaves exposure to the broader technology cycle.

#4. Adding Gold, Silver, and Mining Companies as Defensive Hedges

Gold i silver remain popular hedges in the event of turmoil in highly valued sectors

Why are they used?

• They often diversify their portfolio during stock market declines.
• Mining companies can offer leveraged exposure to rising metal prices.
• Silver can benefit from both industrial demand (including photovoltaics) and its role as a "safe haven"

Risks

• Metal prices are sensitive to changes in exchange rates and interest rate expectations.
• Mining companies carry operational and cost risks.
• Hedging doesn't always work as expected in the short term

#5 Simple Options Strategies for More Stability 

• Protective put options: Basic insurance against major market declines.
• Covered calls: They generate additional income that cushions the more lenient corrections.
• Put spreads: More cost-effective protection by combining two put options.

These approaches help you manage volatility while staying invested in long-term themes.

Risks

• Put options cost money and can reduce the portfolio's rate of return.
• Covered calls limit growth potential
• The effectiveness of options protection weakens as volatility decreases

About the Author

Charu Chanana, market strategist in the Singapore branch Saxo Bank. She has over 10 years of experience in financial markets, most recently as Lead Asia Economist in Continuum Economics, where she dealt with macroeconomic analysis of Asian emerging countries, with a focus on India and Southeast Asia. She is adept at analyzing and monitoring the impact of domestic and external macroeconomic shocks on the region. She is cited frequently in newspaper articles and appears regularly on CNBC, Bloomberg TV, Channel News Asia, and Singapore's business radio channels.