Will the stock market crash due to the bursting of the AI ​​bubble? Yesterday (November 18), even Sundar Pichai, the company’s CEO Alphabet (NASDAQ: GOOG) and its subsidiary Google answered this question with a BBC interview.

Dare I mention the senior rise and fall of the dotcom industry again? I know older people like me talk about this all the time. But if we don’t learn the lessons from the past, we will surely repeat them, right?

I’m talking to BBC NewsPichai said: “We can now look back at the Internet. There was definitely a lot of over-investment, but none of us would question whether the Internet is deep“

He added: “I hope AI will be the same. So I think it’s both rational and there are elements of irrationality at a time like this“

He is not alone

OpenAI CEO Sam Altman recently expressed similar views: “Are we in a phase where investors as a whole are overly excited about AI? My opinion is this. Is artificial intelligence the most critical thing to happen in a very long time? My opinion is also affirmative“

Both seem to believe that some investors will lose money. And I’m afraid some people may lose quite a lot.

So what is the answer? Pichai again: “I don’t think any company will be immune, including us.“

But he also believes Alphabet is in a better position than many to weather the coming storm.

Stick with the biggest?

So one option for AI investors is to stick with the large players. Remember the way Amazon crashed last time but has achieved valuations many times the dotcom peak?

Does Alphabet have the same prospects now? The company’s stock has almost doubled in the last eight months. However, forecasts still indicate that the price-to-earnings (P/E) ratio at the end of the year will only be around 27. Maybe that’s a bit high, but it’s far from the stratosphere, so it can be taken into account.

It’s different now

Before the stock market crash in 2000, we had ridiculously high dotcom P/E ratios, in the hundreds or even thousands. And this time it’s not really happening – well, except maybe Tesla and its P/E of 320.

That being said, today’s Magnificent 7 forecasts are based largely on expectations of accelerating AI spending. And if that falls off, earnings forecasts are sure to decline. And P/E multiples may start to look iffy.

Still, buy large industry players like Alphabet, those who can weather any crash… and ride it out with them. This must be a strategy worth considering.

Another way

But I’m doing something different. I don’t own any AI shares and have no intention of buying any. This is a repetition of my successful strategy that helped me get through the internet bubble with a smile.

As Pichai believes, will all companies suffer in the event of an artificial intelligence meltdown? I can’t see Lloyds Banking Group or home builder Persimmon suffer too much. Remember that there are two types of stocks: AI stocks and everything else.

And never forget one key thing. Diversification is an investor’s long-term friend.