Bill Smead Warns: The AI Boom Won’t Last Forever

Bill Smead Bets on Forgotten Sectors as AI Mania Runs Hot

As Wall Street rides an AI-fueled rally, veteran investor Bill Smead is staying grounded — and looking far beyond Silicon Valley.

Smead, founder and chief investment officer of Smead Capital Management, believes that when the AI boom fades, it’ll be average Americans — not tech giants — who keep portfolios alive.

Through his $4.5 billion Smead Value Fund (SMVLX), Smead focuses on “buying great businesses when they’re deeply out of favor” and holding them long term. “We look for consistent profits, strong balance sheets, and defendable market positions,” he told MarketWatch.

Avoiding the AI Frenzy

Unlike many funds chasing big tech, Smead’s top holdings sit in consumer discretionary and energy, not AI. While his fund has lagged the Russell 1000 Value Index this year, it’s ahead over the past five and ten years.

“I don’t envy people making money in the racy stuff,” he said, adding that AI investments are being made “like drunken sailors on leave.”

Smead expects a “lost decade” ahead — similar to the years after the dot-com bubble and financial crisis — with two bear markets likely in the next seven to eight years. His strategy: avoid what will hurt most when the tide turns.

Investing in Everyday America

Smead sees risk in baby boomer spending drying up when markets stumble, though his son and co-manager Cole believes younger generations will carry on the economy.

Their solution is to invest in companies tied to the real economy — the kind that serve the everyday consumer.

• D.R. Horton (DHI) and Lennar (LEN) – homebuilders trading at a fraction of Costco’s valuation. “D.R. Horton is the Costco of home building,” said Smead.
• Target (TGT) – “Educated women go in for three things and leave with six,” he quipped, calling it the heart of Target’s profits.
• Merck (MRK) and Amgen (AMGN) – long-term healthcare holdings that remain undervalued relative to their performance.
• Diamondback (FANG), Occidental (OXY), ConocoPhillips (COP) – energy plays positioned to gain as the Permian Basin declines over the next decade.

One Quiet Tech Bet

Though skeptical of AI hype, Smead still holds Qualcomm (QCOM), a company delivering 40–50% returns on equity for a decade. “Nobody’s paying attention to them because they’re not part of the AI story — and that’s exactly why they’re cheap,” he said.

If Qualcomm grows earnings 10% annually for the next ten years, Smead believes it could be “a spectacular stock” — proof that patience and value still matter, even in an AI-obsessed market.