The David Lin Report Bubble Bursting Now? Expect 40% Drop In This Sector Warns Fund Manager | Chance Finucane
Nov 6, 2025
Chance Finucane, Chief Investment Officer of Oxbow Advisors, discusses the stock market's perilous overvaluation, primarily due to AI concentration. He highlights the risks of a potential 40% drop in semiconductor stocks amidst a changing economic landscape. Chance shares insights on vendor financing in AI and the implications of Fed easing on inflation expectations. He also emphasizes the importance of diversified portfolios and warns about the volatility from rising retail trading and leverage in the current market.
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AI Concentration Inflates Market Risk
- The recent rally is heavily concentrated in AI-related stocks that now represent roughly half of S&P market cap.
- Such extreme concentration reduces expected 3–5 year returns and increases crash risk if the theme fades.
Rebalance Incrementally, Not Abruptly
- Trim extreme winners incrementally rather than flipping the whole portfolio at once.
- Make small allocation changes over time (1% or 0.5%) to gradually rebalance toward targeted weights.
Vendor Financing Echoes Past Manias
- Big tech firms are using vendor-style financing and heavy CapEx to build AI infrastructure, then issuing debt to fund it.
- That model depends on continued external investor appetite and can reverse quickly, echoing past manias.