Davy 'avoiding overheated sectors' like AI

The financial advisory and stockbroking firm said it will be increasing exposure to emerging markets like Latin America

In the company’s latest Wealth View report for the final quarter of the year, Davy noted that it is too early to say whether AI is currently in a bubble.

Financial advisory and stockbroking firm Davy has said it is “avoiding overheated sectors” such as AI and meme-stocks as “valuations are stretched” and instead is increasing its portfolio exposure to Latin American equities.

In the company’s latest Wealth View report for the final quarter of the year, Davy said there has been a shift in investor focus from trade policy uncertainty to the broader implications of those policies on inflation, consumer behaviour and corporate profit margins.

It said the next set of quarterly earnings will be a key moment for the technology sector which “faces heightened expectations to deliver strong results following months of AI-driven hype”.

The company said it is taking a “selective and diversified approach” to its investments “avoiding overheated sectors like AI and meme stocks” while increasing exposure to emerging markets like Latin America.

The report noted that it is too early to say whether AI is currently in a bubble. It said AI continues to drive equity markets, with 10 US companies accounting for half of the rebound in global equities.

“Although global markets have rallied strongly this year, the recovery has been narrow, focused on a single theme and concentrated in a small number of stocks. Some of this appears speculative,” Davy said.

“The rebound in AI and so-called ‘meme stocks’ has been sharp, but valuations are stretched and in many cases sentiment driven. The US market is particularly expensive, and it is unlikely that earnings growth will continue at the same pace, especially as technology companies divert more cash flow into AI investment.

“Davy has maintained an underweight position in US and technology equities,” the company said.

US economy

The company also said the US economy is sending mixed signals with job growth slowing, tariffs pushing up inflation, and AI investment has overtaken consumer spending as the biggest contributor to gross domestic product in 2025.

Davy said that the dollar remains weak — down 10% on the year — and its portfolio continues to be underweight in the currency.

Davy noted that despite the trade war, recession fears have eased in the eurozone, UK and China as US president Donald Trump backed down from his high tariffs announced in April and began agreeing deals with other countries.

Davy said it manages over €24bn in client assets.