Roger Aliaga-Díaz: AI may be poised to change the world, but how should it inform investors’ portfolios? Investment in AI has powered earnings, and the builders of AI may still have room to run. But their stock market valuations surpass even the most optimistic earnings forecasts, and history suggests it could turn into a performance headwind.

Longer term, and assuming that it succeeds in transforming the economy, we expect AI to provide the greatest benefit to companies using the technology, not its builders. That means value companies stand to benefit rather than growth, and ex-U.S. companies rather than U.S.

Portfolio tilts to value and ex-U.S. could be both offensive and defensive. In the less likely scenario where AI falls short of its full potential, value and ex-U.S. companies could be more resilient than the rest of the market thanks to their more realistic valuations. They will simply have less far to fall.

Meanwhile, the portfolio diversification benefit of bonds is perhaps the strongest it’s been in years. So a balanced exposure to bonds, a mix of maturities and geographies with a modest amount of inflation protection, should offer portfolios a degree of resilience.