With investors desperate to back certainties within highly volatile markets, it’s becoming trickier to second-guess where you should park your money for long-term growth; after all, there’s no shortage of brokers, analysts and fund managers telling you where to find wealth-creating investments.
While the market is currently placing ‘big bets’ on the back of prevailing global narratives around gold, private markets, uranium, AI and big tech, data centres and energy, to name a few, it’s important to stand back before piling on in.
The price at which you enter any investment will have a major impact on your overall returns, and with the gold price starting to unravel, many investors could be setting themselves up for serial disappointment.
With so many of these so-called ‘hot sectors’ displaying characteristics similar to one gigantic Ponzi scheme, investors who enter last are most at risk of financial loss.
Is interest in gold waning?
While gold is often touted as a ‘bet on fear’, the price of the precious yellow metal has dropped well below the psychological level of US$4,000, having recently surged above US$4,380/ounce.
Based on his technical analysis of the XAU/USDT chart, Damian Chmiel of Finance Magnates suggests gold may correct by another 17%.
“… although this would be a strong correction that we haven’t seen in a long time, I would use this as an opportunity to buy more at attractive prices, rather than as a reason to panic,” said Chmiel.
According to Chmiel’s forecasts, based on technical analysis, the first target level for gold declines will be the 50 exponential moving average (EMA) located around the US$3,830 level.
Chmiel attributes a deterioration in the gold price to a growing expectation that the threat of 100% U.S. tariffs on Chinese goods is now off the table, which in turn has dialled down the geopolitical risk premium that propelled gold to record highs in the first place.
“Gold is losing due to decreasing risk regarding international trade, while simultaneously reacting to recent moves from ETF funds,” explained Michal Stajniak, deputy chief analyst at XTB.
However, analysts believe the structural demand drivers for gold still remain intact, with a Reuters poll of 39 analysts and traders revealing a median forecast for 2026 rising to US$4,275/ounce – up sharply from the US$3,400 projected in July.
Will the AI narrative end badly?
Similarly, investors seeking to board the AI train at current levels need to take heed of possible cracks in the fairy tale, with some analysts now suggesting that the hype around it, which put a rocket under the magnificent seven tech stocks (MAG7), has now run its course.
Some analysts are now concerned that the sector’s excessively high valuations will start to unravel, with both Apple and Microsoft reaching a market capitalisation of over $4 trillion after their shares rose.
Underscoring AI hype is the share price growth of U.S chipmaker Nvidia (NASDAQ: NVDA), which has doubled since late April to $201.03, with its worth now more than Australia’s entire stock market combined.
Will investors bail on AI before it becomes profitable?
Harris Kupperman, founder and CIO of Praetorian Capital Management, expects AI to ‘come a cropper’ on the pretext that there simply isn’t enough revenue to cover the current capex spend.
The seemingly endless resources currently being thrown at AI remind Kupperman of the Dot Com bubble of the late 1990s, when the capex cycle was virtually devoid of revenue and profits.
“Now you have megacap tech stocks that are spending almost all of their cash flow on data centres for fear of missing out,” said Kupperman.
“These asset-light businesses suddenly have the capital intensity of a shale company.”
Since losing the AI race is potentially existential, Kupperman suspects that all future cash flow, for years into the future, may also have to be funnelled into data centres with fabulously negative returns on capital.
Once they realise they’re on a race to nowhere and there’s no off-ramp, he suspects shareholders will eventually pull the plug.
“We saw something similar in shale. Even the MAG7 will not be immune,” he said.
Eventually, shareholders will hate the capital destruction—even if at first, they cheered it on out of ignorance.”
Far from over
However, in a counter view, Alicia Gregory, a managing director at Blue Owl Capital, doubts the evolution of AI will be short-lived and, despite bubble fears, believes it’s nowhere near peaking.
She suspects AI is only halfway through its growth cycle, with the next critical stages likely to provide access to AI - at the earlier stages - through private markets, which are a great vantage point from which to identify and act on innovation.
Despite investor alarm bells already ringing over the mounting risks associated with private markets – notably private equity and private credit - she says they play a crucial role in “feeding” listed markets, offering investors an opportunity to get in on the ground floor.
She also reminds investors that many of the world’s most valuable listed technology companies, including those now at the forefront of driving AI innovation, were nurtured in private markets long before they became household names.
“Around 87 per cent of all U.S. businesses with annual revenue of $100 million or more are private businesses, so the move by investors to scour private markets for opportunities is pretty rational”, Gregory said.
“That’s over 18,000 companies in the U.S., and investors have really wanted exposure to these types of businesses in their portfolios.”
