A 20-year veteran fund manager tells us why he's staying away from top tech stocks — and what he recommends buying instead
The debate still rages over whether AI is in a bubble, but most agree that the top stocks sure do look expensive.
While some see the bubble bursting outright, others are eyeing a situation where the momentum slowly seeps out.
The red-hot AI trade has been the driving force behind the market's strong growth in 2025, but not all finance pros are optimistic that the gains can keep piling up at the same pace. David Miller, chief investment officer and senior portfolio manager of Catalyst Funds, is worried about a weakening in the tech trade as the economy slows.
Miller told Business Insider that he thinks the tech stocks that have carried the market for years may be overextended. He's focused on growth opportunities outside AI and big tech, particularly as he thinks a correction is likely in the near future.
The tech-heavy Nasdaq index has struggled over the past week amid selling pressure stemming from concerns about valuations and a cloudier outlook for rate cuts.
Sector leaders such as Palantir, Tesla, and Nvidia stumbled through the week, bolstering Miller's thesis that the AI-driven momentum is waning.
"Given the elevated valuations in tech, enthusiasm could unwind quickly if economic data continues to soften," he told Business Insider. "Much of the market's optimism assumes continued revenue acceleration and margin expansion from AI-related spending. If corporate budgets tighten, or if rates remain higher for longer, that assumption could be tested."
Miller sees several indicators that the economy is weakening. Consumer sentiment is declining and job losses are rising, while tariffs remain a concern. GDP growth may appear stable, but in his view, demand in the economy is softening.
What he's buying instead
As the economy weakens and the AI trade appears fragile, Miller said he's considering investment strategies to guard against more tech-driven losses.
"Outside of AI and the broader tech sector, we're finding the most compelling opportunities in areas that tend to benefit from either slowing growth or persistent inflation pressures," he noted. "Gold and precious metals remain attractive given the combination of central bank buying, geopolitical risk, and the likelihood of lower real rates if the economy weakens."
The fund manager added that if economic conditions worsen or if the AI trade doesn't recover soon, inflation-hedge sectors that generate ample cash could outperform. He cited utilities and energy, as well as certain real estate investments as attractive alternatives to the most popular stocks.
Despite his cautious stance on tech, Miller said that he's bullish on Uber Technologies and Latin American e-commerce giant Mercado Libre, two names that have performed well this year. Uber is up 52% in 2025, while Mercado Libre has gained 20%.
He highlighted that both companies have multiple growth-driving engines that give them plenty of room to run.
Miller acknowledged that from his firm's perspective, balance will be key for investors seeking the most effective ways to play the combined trends of a shifting AI trade and a weakening economy.
"The long-term potential is substantial, but in the near term, prices have moved ahead of fundamentals in several high-profile names," he said. "As a result, we think selectivity is key, and investors should balance AI exposure with assets that generate steady cash flow and perform well in a slower growth or higher volatility environment."
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