Investor excitement about AI stocks has helped to drive big gains for the U.S. and international stock markets in 2025. But what if the AI party goes bust this year? A possible AI crash is top of mind for global investors. According to the Deutsche Bank 2026 Global Markets Survey, 57% of respondents believe that the biggest risk to market stability this year is "tech valuations plunge/AI enthusiasm wanes."
Investors already seem to be getting apprehensive about AI stocks. The Global X Artificial Intelligence & Technology ETF (AIQ 0.15%) has gained 29% in the past year, outperforming the S&P 500 index, which is up 13.6% in that time. But after reaching an all-time high of $53.75 on Nov. 3, this AI stock ETF quickly declined 11% by Nov. 21, and was still down about 2% off its high as of Jan. 22.
If you want to invest your money in a safer way to avoid some downside risks of a possible AI tumble, here are a few possible strategies.
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Buy value stock ETFs
The S&P 500 index has become top-heavy with highly valued technology stocks. If you want to diversify your portfolio against the risks of an AI crash, you could consider buying value stock exchange-traded funds (ETFs) instead. The Vanguard Value ETF (VTV +0.34%) gives you access to 312 stocks across a wide range of sectors, and only 7.8% of the portfolio is technology stocks.
The top five holdings in the Vanguard Value ETF are JPMorgan Chase, Berkshire Hathaway, ExxonMobil, Johnson & Johnson, and Walmart. None of these companies are heavily invested in AI or considered to be AI stocks. You can own this fund for an ultra-low expense ratio of 0.04%.
NYSEMKT: VTV
Key Data Points
This ETF offers a 9.9% earnings growth rate and a price-to-earnings ratio of about 21. That's less than the S&P 500 index P/E ratio of 31 and the Invesco QQQ Trust's P/E ratio of 33.9.
Buy small-cap stock ETFs
Another way to reduce your risk of an AI stock collapse is to buy small-cap stocks. Smaller companies typically have limited exposure to the AI trade and are often valued at lower multiples compared to major tech stocks. Small-cap stock index funds could put your money to work in a different area of the market, away from the AI craze. And some of today's small-cap stocks could become the fast-growing companies of the future.
One of the best small-cap stock ETFs is the iShares Russell 2000 Growth ETF (IWO 0.27%). This ETF includes 1,098 holdings across sectors like healthcare (24.3% of the fund), industrials (23.8%), information technology (20.5%), financials (9.7%), consumer discretionary (7.9%), materials (3.8%), energy (3.1%), and more.
NYSEMKT: IWO
Key Data Points
The iShares Russell 2000 Growth ETF charges an expense ratio of 0.24%, which includes a management fee. And it's trading at a P/E ratio of about 30, which is cheaper than the S&P 500 or the Nasdaq-100.
Buy bond ETFs
The 2026 Vanguard economic and market outlook (VEMO) report is bullish on bonds. Vanguard's research team estimates that, among public investments, high-quality U.S. fixed income has the strongest risk-return profile for the next five to 10 years. VEMO research projects that high-quality U.S. bonds will deliver about 4% returns for the next 10 years.
In case AI technology fails to deliver the expected productivity gains and the AI stock mania turns into an AI slump, investing in bond ETFs can be a good way to hedge your risks.
The Vanguard Total Bond Market ETF (BND +0.12%) lets you own a broad range of investment-grade U.S. bonds, with a low-cost expense ratio of 0.03%. This ETF gives you access to more than 11,000 government and corporate bonds, which mostly have high credit quality. U.S. government bonds make up 69.3% of the fund's holdings, and another 18.3% of its holdings have a credit rating of A or higher.
NASDAQ: BND
Key Data Points
No one knows for sure what will happen with the stock market or the bond market in the future. There is no such thing as a risk-free investment. The price of stock and bond ETFs can go up or down. But if you don't want to invest too heavily in tech stocks and the AI boom, these strategies could be a smart way to diversify your portfolio into a broader range of assets -- and reduce your risk of an AI crash.
