Jeffrey Gundlach reduces equity allocation to mitigate AI risk

Jeffrey Gundlach, the founder and Chief Investment Officer of DoubleLine Capital, is reducing his recommended equity allocation from 40 percent to 30 percent to mitigate risks associated with artificial intelligence.

To avoid concentration risk in AI-driven tech giants, Gundlach intends to move his remaining equity portion into an equally weighted index based on the Fortune 500. This approach weights companies by number rather than market capitalization, which he argues effectively decouples the portfolio from the AI narrative. He noted that in such a structure, an investor would hold a minimal fraction of any single company rather than having a large percentage of the portfolio tied to AI-centric growth.

The remaining 70 percent of the recommended allocation will be shifted toward bonds, commodities, and gold. Gundlach cited a Shiller P/E ratio exceeding 42 as a warning signal and expressed expectations for a shift toward the “hard side” of valuations over the next six to nine months.