Finance

'Companies are essentially failing': Experts warn of a disturbing disparity between 'old' and 'new' era stocks. How to cash in before it's too late

Moneywise · Jul 22, 2026 13:50 · 8 min read

AI stocks are racing ahead 'almost in isolation,' says seasoned investment strategist Jim Paulsen.

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AI has exploded into being the predominant engine behind America’s GDP growth (1) and the stock market’s celebrated rally in 2026 (2), but while some investment pundits continue to endorse chip makers (3) and hyperscalers, others are warning of the collapse they believe will inevitably follow such speculative conditions.

JPMorgan Chase CEO Jamie Dimon, Mad Money host Jim Cramer, The Big Short inspiration Michael Burry and others have compared the high spirits of recent months to those felt just before the dot-com bubble burst and plunged the world into a paralyzing (although short-lived) recession at the turn of the millennium.

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We can add to this list of admonishers seasoned investment strategist Jim Paulsen, who has recently called attention to an unsettling trend in the S&P 500, going so far as to question “how sustainable a bull market is where so many (most!) companies are essentially failing (4).”

Or, in other words, the market now seems to award failure as well as success.

‘Extreme’ bifurcation between new and old era stocks

Paulsen, who spent decades as chief investment strategist for the Leuthold Group, now — like Burry (5) — dispenses financial advice largely via a Substack (6) and associated newsletter that thousands look to for economic guidance. His last few posts focus on an “extreme” bifurcation of the market that doesn’t bode well for AI enthusiasts.

As Paulsen explains, what keeps such historic stock market highs grounded is the “old era” stocks such as banking, manufacturing and the like, which tend to trend in the same direction as the shiny new tech stocks responsible for the rise. But, what we’re seeing now is the opposite: AI shares “racing ahead almost in isolation (7),” which he suggests is an almost guaranteed hallmark of trouble.

“For the last 30 years, the correlation of daily price movements between new era and old era stocks during the last year has proved to be a good risk indicator for new era investors,” Paulsen wrote.

“The most recent rally in new era stocks since March 30 has been explosive, causing a breakout of optimism among investors that AI excitement is leading the stock market on another significant leg higher. However, this latest rally has been associated with an alarming drop in the trailing 12-month new/old era stock price correlation, suggesting the contemporary rally may not be sustainable.”

As Paulsen highlights, the last few times this pattern has shown itself, there was a subsequent downturn of the stocks that had been serving as the primary drivers of the runaway market success — a “notable pause,” if not some “meaningful underperformance.”

Bifurcation isn’t new — but it’s reached a drastic level

Though this bifurcation started back in 2022 — when the contemporary bull market germinated — the imbalance has become more pronounced over time. Even if the reasoning behind why some in one category are besting some in the other is sound, Paulsen questions “how much confidence investors should have about the most recent explosive new era run (7).”

In mid-May 2026, 5% of the components of the S&P 500 sank to 52-week lows, while the overall index was at a record high — only the fourth time in recorded history (8) that such a phenomenon has taken place. And over the last two months, new era AI stocks have performed, on average, nearly seven times better than the rest of the index, up 36.2% compared to 5.3% (4).

Even more worrying is that some of the forerunners are pulling ahead of Apple, Amazon, Alphabet and the rest of the almighty “Magnificent Seven” stocks despite never having actually turned a profit (others, meanwhile, have notoriously overinflated valuations and earnings).

Your own portfolio comes down to risk tolerance

Joining the AI party can precipitate some big wins, but it also carries a lot of risk. Experts like Burry have called out the sector’s “supply-side gluttony (9)” via “catastrophically overbuilt” infrastructure that is being scaled largely in response to hype rather than paying end-user demand.

As he wrote on his own Substack in May, “stocks are not up or down because of jobs or consumer sentiment. They are going straight up because they have been going straight up [based] on a two-letter thesis (AI) that everyone thinks they understand.”

Whether you want to credit AI for kicking off a new industrial revolution (10) or you expect the obsession to eventually ebb (11) from its present heyday, there’s no denying that the tech’s impacts on nearly all facets of daily life have been monumental, indelible and, above all, unprecedented — up to and including its hold on the stock market.

Ultimately, how much true faith you have in AI’s future, and the degree to which you want to put your money where your mouth is, is up to you.

But don’t say the Burrys and Paulsens didn’t warn you.

Getting a second opinion

If you're wondering how much exposure to AI makes sense, you don’t have to make that decision on your own.

A financial advisor can help translate market headlines into practical decisions based on your personal goals. Instead of chasing whichever sector is dominating the news cycle, an advisor can help identify concentration risks, uncover blind spots in your portfolio and ensure that a single investment theme doesn’t end up carrying more weight than it should.

But hiring an advisor can be a lifelong commitment, which might make or break your retirement. If you have a portfolio of $250,000 or more, platforms like WiserAdvisor can connect you with vetted professionals who specialize in this kind of planning.

Simply answer a few questions about your savings, retirement timeline and overall investment portfolio.

From there, WiserAdvisor reviews its network to match you — for free — with up to three vetted, reputable advisors aligned with your specific needs.

You can then schedule no-obligation consultations with your matches to determine who is the best fit for your long-term goals.

WiserAdvisor is a matching service and does not provide financial advice directly. All matched advisors are third parties, and specific financial results are not guaranteed.

Once you’ve got the right financial advisor in your corner, the next step is getting a clear picture of where your money’s actually going. That starts with the basics — budgeting and tracking your spending.

You don’t have to do it alone

Investors like Michael Burry don't make billion-dollar bets based on just headlines. Behind the scenes, they often rely on teams of analysts, researchers and industry specialists, all of whom spend countless hours digging through financial statements and evaluating business models. That level of research gives institutional investors a significant advantage.

The good news? Access to quality research is no longer reserved exclusively for hedge funds and Wall Street insiders.

Platforms such as Moby offer expert research and recommendations to help you identify strong, long-term investments backed by advice from former hedge fund analysts.

In four years, and across almost 400 stock picks, their recommendations have beaten the S&P 500 by almost 12% on average. They also offer a 30-day money-back guarantee.

Moby’s team spends hundreds of hours sifting through financial news and data to provide you with stock and crypto reports delivered straight to you. Their research keeps you up-to-the-minute on market shifts and can help you reduce the guesswork behind choosing stocks and ETFs.

Plus, their reports are easy to understand for beginners, so you can become a smarter investor in just five minutes.

Diversifying beyond the S&P 500

Even if you’re bullish on AI, diversification still matters. Relying too heavily on a single asset class can leave portfolios vulnerable when market conditions change.

Alternative assets like gold and real estate can help hedge your portfolio against systemic market risks. These assets respond differently to economic events, helping reduce the impact of market volatility on an overall portfolio.

In fact, gold has long been viewed as a hedge against uncertainty. While stocks — AI-linked or otherwise — can experience sharp swings during periods of economic stress, gold often follows a different path. That’s because, unlike corporate earnings-driven assets like stocks, gold’s value often rises when investors seek safety. During periods when inflation and recession fears coincide, the precious metal could help offset some of the market volatility.

Going for gold

One way to invest in gold that also provides significant tax advantages is to open a gold IRA with the help of Priority Gold.

Gold IRAs allow investors to hold physical gold or gold-related assets within a retirement account, which combines the tax advantages of an IRA with the protective benefits of investing in gold, making it an attractive option for those looking to potentially hedge their retirement funds against economic uncertainty.

To learn more, you can get a free information guide that includes details on how to get up to $10,000 in free silver on qualifying purchases.

An easy alternative to precious metals

Real estate can offer similar benefits to gold. Property values don’t always move in lockstep with the stock market, which means real estate exposure may help smooth portfolio returns during turbulent periods. Real estate can also provide a degree of inflation protection. As construction costs, land values and rents rise, property owners often benefit from higher asset values and stronger income potential.

The good news is that investing in residential real estate no longer requires taking on a mortgage, saving for a large down payment or managing tenants.

You can tap into this market by investing in shares of vacation homes or rental properties through Arrived.

Backed by world-class investors, including Jeff Bezos, Arrived allows you to invest in shares of vacation and rental properties, earning a passive income stream without the extra work that comes with being a landlord of your own rental property.

To get started, simply browse through their selection of vetted properties, each picked for their potential appreciation and income generation. Once you choose a property, you can start investing with as little as $100, potentially earning monthly dividends.

The best part? For a limited time, when you open an account and add $1,000 or more, Arrived will credit your account with a 1% match.

— With files from Becky Robertson

SerpApi.Org

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'Companies are essentially failing': Experts warn of a disturbing disparity between 'old' and 'new' era stocks. How to cash in before it's too late

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‘Extreme’ bifurcation between new and old era stocks

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