July 22, 2026, (Inside AI) — The artificial intelligence trade has become the most crowded in its history, according to Goldman Sachs, prompting institutional investors to search for uncorrelated assets. Helen Jewell, International CIO of Fundamental Equities at BlackRock, argues that effective diversification is still possible, pointing to healthcare, Latin American equities, and UK stocks as overlooked hedges.
Over the past year, an iShares ETF tracking AI stocks doubled in value before a recent pullback. The momentum factor—where winners keep winning—has returned nearly 200% over five years, per BlackRock. But this concentration risk is now prompting a rethink.
The Unseen Hedge: Where Diversification Still Works
Jewell’s analysis shows the MSCI All Country World Index had a 0.79 correlation with AI stocks over the past 12 months. Healthcare, by contrast, showed a correlation of -0.06 with AI and just 0.12 with momentum. This near-zero relationship underscores its defensive utility.
Healthcare’s earnings resilience stems from demographic shifts and medical innovation. Yet the sector trades at a 15% discount to the broader market, a rarity after decades of premium valuations. Jewell cautions that stock selection is critical, noting healthcare had the second-highest dispersion of returns last year, per FactSet and BlackRock.
She highlights firms leveraging AI to analyze medical data for faster disease detection. Such applications could persist even if the AI hype cycle cools. Academic research supports this: a 2023 study on AI in medical imaging found robust diagnostic improvements independent of market sentiment.
Beyond the Obvious: Latin America and UK Markets
Latin American equities also show low correlations with AI and momentum. The region represents just 0.8% of the MSCI ACWI but 7% of global GDP, per BlackRock. Brazilian and Mexican stocks trade at discounts to historical valuations, while most major markets are at premiums.
Potential catalysts include interest rate cuts and rising commodity demand from AI and electrification. Official data from the IMF World Economic Outlook projects Latin America’s growth above the global average, supporting the re-rating thesis.
UK equities, with a 0.26 correlation to AI, have outperformed global stocks on a total return basis over five years. The FTSE 100’s exposure to “old economy” sectors—financials, materials, energy—provides a buffer against AI disruption. Jewell notes these sectors could actually benefit from AI through cost-cutting or commodity demand.
Political stability could close the valuation gap with developed peers, after a decade of six prime ministers. Jewell suggests that greater confidence might spur domestic investors to join foreign buyers.
The obvious risk is that AI momentum continues, making diversifiers a drag. But with the U.S. semiconductor index already pulling back this month, Jewell argues that holding hedges remains prudent. Her view aligns with Goldman Sachs’ warning on crowding, as detailed in their recent AI investment forecast.
Jewell concludes:
“The AI trade could stall—whether due to concerns about over-investment or some unforeseen event. We’ve already seen a pullback in the U.S. semiconductor index just this month. So holding stocks to help weather the storm still seems prudent.”
The column reflects Jewell’s personal views and not investment advice. It comes as institutional portfolios grapple with concentration risks reminiscent of the dot-com era, though today’s AI infrastructure buildout may have more tangible earnings support.
