You don’t need to be Nostradamus to know that the stock market will crash. When? Who knows. But while history tells us that markets frequently fall more than 20% from recent highs, it also provides plenty of evidence to suggest that they are likely to recover to pre-crash levels.
However, could things be different now with the emergence of artificial intelligence (AI)?
Those of a nervous disposition look away now
Citrini Research recently outlined a scenario (not a prediction) in which more and more jobs are replaced by machines, leading to a fall in wages and a severe recession brought about by a collapse in the mortgage market.
It paints a picture of the S&P 500 falling 57% from its October 2026 peak.
As investors, we still have time to assess how much of our portfolios are built upon assumptions that won’t survive the decade. As a society, we still have time to be proactive.
Citrini Research
Although I’m aware of the risks, I’m not too concerned. Are we going to be stupid enough to let AI ruin our lives in such a way?
However, regardless of whether a crash is going to be caused by AI or not, here’s what I’m doing to try to protect myself should the worst happen.
My strategy centres on a three-pronged approach:
- Holding more cash than normal.
- Maintaining a diversified portfolio.
- Taking a long-term view.
Get ready…
Having some uninvested cash means I can react quickly should any opportunities arise to bag myself a few bargains. And being diversified is important because defensive stocks tend to be less affected by the business cycle.
It’s also important to try and ignore any short-term disruption. During Warren Buffett’s six decades at Berkshire Hathaway there were plenty of slumps, crashes, and corrections. Yet astonishingly, $1 invested in the company in 1964, would have been worth $60,993 at the end of 2025.
The biggest and best?
One stock that I think could be a long-term winner is Nvidia (NASDAQ:NVDA).
Remarkably, of 70 Wall Street analysts covering the stock, 64 give it a Buy rating. Only one is advising its clients to Sell.
Of course, these 64 could be wrong.
It’s likely that a rival chip will emerge. Many well-funded companies, including some household names, are working on their own versions.
And Bloomberg reported in April that up to half of all US data centres planned for 2026 are likely to be delayed. A lack of access to suitable energy infrastructure and equipment shortages are the biggest problems.
However, it’s always worth sitting up and taking notice when there’s near-unanimity of opinion among brokers.
Personally, I think the potential for Nvidia is huge. If the company can achieve (or even get close to) some of the earnings forecasts that I’ve seen, its stock looks remarkably cheap to me. Its new Vera Rubin chip is massively more powerful than its current Blackwell version. And the group’s venture capital arm is investing heavily in “technology visionaries solving complex problems”.
Inevitably, Nvidia would be caught in the fallout from a stock market crash. But over the long term, I’m sure the demand for semi-conductors will rise massively. The company’s been described as the least replaceable in the industry. I agree. That’s why I think it’s a stock to consider.
