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I am growing more concerned that just about everyone I hear these days seems to be convinced “we are still in the early stages of an AI boom and this means we are heavily weighted in large cap tech stocks because they will be the clear winners" (or some variation thereof). You might want to consider a stock like Bristol-Myers Squibb Co. (BMY) instead.

Yes, it is true that big bucks are currently being thrown at just about anything and everything related to AI, and the stocks of virtually all of the companies involved with spending and/or receiving those big bucks have been on fire lately. But it is also true that, at some point, the rate of spending will almost certainly slow down.

History tells us that once it does, the stocks will almost certainly reverse course as well and start heading south again until the stock prices return to levels that more closely match the actual fundamentals rather than the “dreamed about” fundamentals.

Bristol-Myers Squibb Co. (BMY)
 

I am in no way claiming that “the turn” is about take place. However, I am repeating that the valuations for virtually all of the Mag Seven stocks have moved even deeper into “not cheap” territory. So, I am comfortable reducing our overall exposure to the market in order to help myself continue to sleep easy at night while we wait for things to play out.

As for BMY, a case can be made that the stock might be in the early stages of forming a base. Given that I am currently willing to take a bit of a contrarian approach to the market in response to the unbridled optimism we are seeing for large-cap tech stocks these days, I am comfortable doing a bit more nibbling in the biopharma space. Just be disciplined about scaling into your position over time.

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