Dimon warns AI stocks may disappoint; diversified ETFs emerge as safer bet

Jamie Dimon, CEO of JPMorgan Chase and a widely respected voice in American business, raised a caution about artificial intelligence stocks in a recent interview on the Master Investor Podcast with Wilfred Frost. While Dimon acknowledged that AI investment will probably pay off in total—much as the internet did—he emphasized that investors should not expect returns to materialize on their preferred schedule or in the way they anticipate. "When I look at AI itself, the amount of money being spent is huge. Will it pay off in total? Probably, just like the internet did. Will it pay off the way you expect and the timetable you expect? Definitely not," he said.

Dimon's concern draws a direct parallel to the dot-com boom and bust of the late 1990s. Before the emergence of lasting internet winners like Alphabet, the era saw the bankruptcies and failures of once-celebrated companies such as Yahoo! and Netscape. His point is not that AI will fail but that investors face genuine uncertainty about which companies will survive and thrive in an AI-driven future. Given this uncertainty, the article suggests that smart investors should abandon the search for the next Alphabet among AI stocks and instead adopt a long-term, fundamentals-driven approach grounded in diversification.

The article presents two exchange-traded funds (ETFs) as vehicles for this strategy. The Vanguard Morningstar Total Stock Market ETF (VTI) holds 3,531 stocks—essentially the entire U.S. market across all company sizes and sectors—and charges an expense ratio of just 0.03%. Over the past 10 years, VTI has delivered average annual returns of 14.5%, and over the past five years, 11.75%. For investors who believe the U.S. economy will keep growing and generating profits but are uncertain about AI's specific winners, this broad approach offers protection against picking wrong.

Alternatively, the Invesco Nasdaq Next Gen 100 ETF (QQQJ) holds 106 smaller companies that might become the future giants of technology, with top holdings including eBay (2.4% of the fund), Natera (2.2%), Credo Technology Group (2.2%), Flex (2.1%), and Revolution Medicines (2.1%). Not all holdings are directly tied to AI, but the fund offers exposure to companies involved in cloud computing, cybersecurity, natural language processing, and related services. QQQJ has delivered 18.6% annualized returns over three years and 32.9% over the past year, with a 0.15% expense ratio. This ETF fits a strategy of betting that future AI winners may not be the household names of today, aligning with Dimon's implicit critique of current market expectations.