EXCLUSIVE: AI Bubble Risk Is Low, but SMH Faces a Bigger Threat Than QQQ, Expert Warns

What happened

Ai Funds founder Tal Schwartz says the risk of an AI bubble bursting is relatively low, with the firm’s index scoring it 3 out of 20 on Oct. 2. He warns that VanEck’s SMH may be vulnerable to slower AI spending because Nvidia is about 21% of its holdings and its top 10 holdings make up 69%.

Confirmed

Global impact / market context

If companies slow spending on AI-related equipment, chipmakers could face weaker sales, and a fund concentrated in those firms could fall more sharply. SMH’s holdings are more concentrated than Global X’s AI and technology ETF, making its performance more dependent on a small group of companies.

Analyst inference

The article distinguishes broad-market bubble risk from risks within particular funds: the index’s low reading does not assess individual sectors. It reports that Global X’s fund owns about 90 stocks, with its top 10 at around 33% and Nvidia below 3%, versus SMH’s higher concentrations.

Confirmed

What to watch

1. Watch for updates to the AI Bubble Pop Index and its reading; the reported 3-out-of-20 score reflects Oct. 2 data and measures broad-market risk, not sector risk. Analyst inference
2. Track company spending on AI equipment: a slowdown could reduce chip suppliers’ sales, the specific pathway Schwartz cites for concentrated semiconductor funds such as SMH. Analyst inference
3. Compare fund holdings and concentration over time, especially Nvidia’s share and the top 10 holdings, to see whether SMH’s dependence on a few companies changes. Analyst inference

Evidence

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