Markets are doing fine. Right???

Without AI companies, stock indices would be negative this year. Look at the S&P 500 AI companies’ contribution to performance (in orange) below: it is all about AI.

This is probably not surprising to most of you. As investors, should we be concerned about such concentration of earnings, spending, success, bets, interest, focus? What if AI growth will disappoint?

The AI-related data center build-out around the planet is pushing giant AI companies to issue bonds as never before, leveraging up to pay expensive Capex plans. This means that also bond markets are becoming way more concentrated around AI companies.

Something fishy about tech can be observed in the recent Nasdaq vol.

Volatility in the tech-related Nasdaq index (the unpredictable fluctuations of the index price over time) has been MUCH higher than normal vs the S&P 500. Has this been the institutional annoyance about the incredibly expensive Space X IPO that is so much loved by retail investors?

Look there is nothing to worry about AI expected returns, as AI-related company earnings remain very solid in key markets.

When earning are high, no bubbles should exist and stock prices can go higher as far as earnings move higher, right? Right???

Yes, prices are NOT in a bubble with such earnings growth realized and expected.

BUT....

….equity investors make good deals ONLY when they buy stocks at convenient prices, with more upside to come. And good stocks at convenient prices are available only BEFORE the majority understands that earnings are moving higher. But when everyone does, then the good news are absorbed into the higher prices.

Right now, when realized and expected AI earnings are both HIGH and WELL-KNOWN, future equity returns tend to be disappointing. Take a look yourself below.

The key problem for investors right now is NOT how the global economy might do, as the threat of a full war between US and Iran has been fading and leading indicators remain positive. Rising inflation and rate hikes bother bonds and could become an issue for stocks later on, but stocks will theoretically remain supported with inflation up to 5/6%.

The key issue is where to find new drivers of growth away from AI, as AI concentration risk is significant across asset classes and a lot of good news are priced-in.

Irrationality can exist for a while - see the abnormal valuation of Space X after the IPO with retail flows buying and buying unproven cash flows at a-too-expensive price tag. But it does not typically sustain itself forever.

Meanwhile, US rate expectations are finally moving higher, catching up with the new reality of higher US inflation. In Europe we have already seen one rate hike from the last meeting, and two more are priced-in for this year.

Current rate expectations - two more hikes in Europe by the end of the year, and one hike by December in the US.

The environment is turning less forgiving.

So what to do? Where to invest in such an expensive, uncertain environment?

Right now, CARTESIO - our multi-agent system - is running the following portfolio allocation in Pantarai ADAPT (Friday 19/06/2026):

• 70% long stocks, 30% bonds with no commodities

• Allocation is tilted towards Italy (riding the optimism surging from the Intesa - MPS deal), Emerging markets and Japan, on top of (a reduced) Nasdaq exposure

If you don’t know what we do, here’s a quick primer:

at Pantarai, a fintech startup, we run AI-powered adaptive investing. The protagonist is Cartesio, our autonomous, multi-agent system decoding markets and making investment decisions every day.

“Markets move. So do we.”

First, Cartesio operates as an agentic hedge fund manager, constantly adapting the asset allocation of our listed investment strategy (Pantarai ADAPT) to shifting market conditions.

Second, Cartesio open-sources its daily market reasoning in a tactical navigation system, sharing signals and insights, generating views and trading ideas and publishing a number of adaptive model portfolios built with mainstream ETFs.

You can access all the reasoning, insights and views of our multi-agent AI system here.

Investors can buy the strategy and put their money on auto-pilot for adaptive diversification and/or use the Cartesio terminal as a co-pilot to understand why markets move, plan the next trade or subsequently amend their portfolios.

Current net performance is robust at 6.8% (including all fees) in the upper part of our tunnel, and almost 2% above a neutral 60/40 portfolio.

The beauty is running such performance with tighter drawdowns and lower volatility (30% less than MSCI World).

You can see the evolution our our asset allocation here.

Speak soon

Nico