Sergio Hernández Paz

Here is an interesting fact about the DotCom bubble collapse from 2000 to 2002 When the bubble burst, the tech heavy Nasdaq 100 fell 77% and the S&P 500 fell 49%, dragged down by extremely overvalued Internet Tech stocks. At the same time, Warren Buffett's Berkshire Hathaway gained +80% during the collapse. This is because he had zero tech stock exposure and was invested in non-tech, highly profitable stocks like Coca Cola, American Express, Gillette, Washington Post and Moodys. When money ran out of tech, it flowed into all the non tech. However, during the DotCom boom, from 1998 to 2000, Buffett's portfolio underperformed the market significantly. While all the money was chasing after sexy DotCom tech, his non-tech stocks dropped like flies. What's the Lesson from this? 1) When the AI/Crypto/Quantum/Nuclear Bubble bursts eventually (I don't know when), the overvalued and unprofitable stocks in this sectors will drop 50% to 80% 2) The money will flow into the profitable non-AI stocks that have been neglected and forgotten (i.e healthcare, software, industrials, staples etc...) which will then surge 50% to 80%. This rotation is inevitable. My portfolio currently has a) 38% exposed to high quality, AI-related stocks (mainly hyperscalers) and b) 62% exposed to high quality non-AI related stocks (healthcare, industrials, staples, financials and discretionary) So, while I am riding the AI boom (and outperforming the S&P 500 & Nasdaq 100), I am doing it in a safe, diversified way. When the bubble bursts (who knows when?), my non AI stock exposure should have huge outperformance, which should buffer the drawdowns in my AI related stocks. The key to consistently profitable investing is not to time the top of the market (no one can), but to build a resilient, bullet proof portfolio that will continue to grow under all kinds of economic conditions.