CNBC: AI bubble hasn’t popped and deceleration is from rapid growth, says Michael Landsberg

July 30, 2024

Michael Landsberg, CIO of Landsberg Bennett Private Wealth Management, joined CNBC ‘The Exchange’ to discuss the AI outlook, the current market pullback, and his broader investment strategy.

Landsberg addressed the recent sell-off in AI stocks, emphasizing that it represents a typical market reset rather than the bursting of an AI bubble. He highlighted the importance of rebalancing portfolios to manage risk and underscored that long-term earnings growth will continue to drive stock performance.

Landsberg remarked, “It’s a little bit of a reset,” and “Ultimately, earnings drive stocks at the end of the day.” He also noted that while some deceleration in growth rates is natural, “A lot of these companies are going to drive earnings going forward.”

Landsberg explained that the AI sector had experienced rapid growth over the past year, making the current correction a normal part of the investment cycle. He pointed out that such resets help to normalize valuations and maintain a balanced risk profile within investment portfolios.

He stated, “When you have big runs like that, that’s why you rebalance portfolios to keep the risk in check.” Landsberg also shared his perspective on the Federal Reserve’s influence, mentioning that any anticipated Fed action will ultimately play a secondary role to the fundamental earnings performance of companies.

Key Takeaways:

  1. AI Market Reset: Landsberg described the recent pullback in AI stocks as a normal market correction following a period of significant growth. He stressed, “Are they going to grow at 250% year-over-year? Of course not,” but affirmed the long-term prospects for AI remain strong.
  2. Earnings as a Driver: He reiterated that earnings ultimately drive stock prices, stating, “Earnings drive stocks at the end of the day.” Despite some volatility, companies that continue to show strong earnings growth will perform well in the long run.
  3. Market Rotation: The current market environment is seeing a rotation out of some high-flying sectors like AI. Landsberg noted, “When you have big runs like that, that’s why you rebalance portfolios to keep the risk in check.”
  4. Stock Selection: Landsberg emphasized the importance of stock picking, especially in volatile sectors like AI. He suggested that some companies will continue to deliver strong earnings, while others may not, making careful selection crucial. “It’s a stock picker’s market when it comes to AI,” he said.
  5. Long-Term Holding Strategy: He discussed the necessity of a disciplined approach to portfolio management, including regular rebalancing. This approach involves trimming positions when they become too large and adding to them when prices correct, ensuring a balanced portfolio over time. Landsberg advised, “Trim some of our positions… and if it has a bad six months, we’ll be adding to it back in January.”

Learn more here: https://www.cnbc.com/video/2024/07/30/ai-bubble-hasnt-popped-and-deceleration-is-from-rapid-growth-says-michael-landsberg.html

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