Angela Mwanza, Managing Director and Private Advisor at Rockefeller Global Family Office, discusses why she doesn't necessarily see an AI bubble with Bloomberg's Romaine Bostick and Katie Greifeld on 'The Close.'

Angela Mwanza addressed concerns about a potential bubble in the AI sector, noting that despite high valuations, strong fundamentals such as cash flow and earnings support the current market growth. She highlighted that over 80% of companies are beating earnings expectations, and AI adoption is widespread across industries.

Mwanza also discussed the importance of managing concentration risk in portfolios, especially with the dominance of AI-related stocks. She touched on the influence of upcoming Federal Reserve decisions, the need for diversification into commodities like gold and silver, and ongoing vigilance regarding tariffs and inflation.

Mwanza: Don't necessarily see an AI bubble

Angela, I do want to start off with the AI trade. I mean, there's been, this has been the heavy lift for markets for really the last three years since a chat GPT kind of came into the public consciousness here. And I think everybody keeps looking at it and saying, when does this all come crashing down? But everyone you talk to, when you ask, is this a bubble? You find very few people who are willing to say that at least right now, they see a bubble in the AI trade. Do you see one? I don't necessarily see a bubble per se. You know, if you think about what's the definition of a bubble, I think about, okay, well, we've got high valuation. Do I have high growth? And are there real fundamentals behind that growth? Look at all the cash flows, look at the revenues. Even now, we're early on in earning season. We're seeing over 80% of companies reporting are beating expectations and by a pretty decent margin. So as long as we're seeing those fundamentals, as long as we're seeing that cash flow, those revenues, the earnings, it doesn't rhyme with the old 99, 2000, where everything was like gung-ho. But if you looked underneath the cover, it was kind of like the little duck feet underneath and nothing really happening. Do you see that trade though broadening out a little bit? We've been talking a lot about how for the last couple of years, it was Nvidia, Microsoft, a couple other big companies. But now you're seeing a lot of other sort of companies on the periphery that are, at least on the surface, appear to be benefiting from this trade as well in a variety of industries. That's very true, Romain. Actually, I think most companies, about 80% of companies are saying that this adoption rate of AI has really precipitated and it's being welcomed in regardless of the industry. I think what we're seeing also is that because there's been such a run-up of these tech names, of these AI-driven names, and we're kind of painting everything with a broad brush here. I mean, we're talking about whether it's cloud, we're talking about ad sales, we're talking all of these, the Mach 7, each of these, the growth rate behind it is so huge that it's an outsized portion of our portfolios now. And so we're looking at this concentration risk. Yes, we believe in the AI story. And yes, it belongs in the portfolio and in our clients' books. But the concern now is having this huge, big outsized holding and you have a very low cost basis. And so as we're going into year-end and looking at planning with our clients and looking at our diversified portfolios, we're saying, how do we manage for the potential tax impact if we reduce that? But we definitely want to reduce that because we're concerned about the risk. Absolutely. Well, I want to bring the Fed into this conversation because we do have a Fed decision tomorrow, that two-day meeting kicking off today. When you think about the direction of markets from here through the end of 2025, I mean, to boil it down to this week, which do you think is more important in determining that direction? Is it these big tech earnings that we're going to get or is it what we hear from Jerome Powell tomorrow? I think there's, I don't expect there to be any surprises around what we hear from Federal Reserve Chair tomorrow. I think we're looking at 25 basis points tomorrow, probably another 25 basis points in December, and then Q1, maybe a third 25 basis points. What we are looking towards, what is potentially shake markets is who's going to actually take his place. We have five good contenders. And now the question is, how will the global markets react to who that pick is? And can they really reflect and show the market that they are truly independent? Are you comfortable with all the names that have been floated out there publicly? I mean, so far, so good. You know, the proof is in the pudding, as they say, but I mean, the one or two that I think are probably more likely, but I don't want to name names and mess all the betting pools out there. Right, as prediction markets become a bigger and bigger force so you're comfortable with the five candidates listed there. I mean, what are your client conversations sound around that? We have until May, 2026 to sort of blueprint what the market reaction might look like, but we know that the decision for the president is coming sometime soon. Secretary Scott Besson saying that he wants to get this list to the president within weeks now. I mean, we're expecting some resolve towards the end of the year. We won't know until we get there. For us, we're really looking at how do we manage risk? How do we stay diversified? I'm very concerned about what's happening around tariffs. On the one hand, very happy to see US-China relations de-escalating and hopefully coming towards a resolve, but inflation is still a concern that we're thinking about. We're looking at hedging. We like commodities. We like gold. We like silver. We're adding that to the portfolio. Still? Still. At these levels? At these levels, still, because it takes a while for these tariffs to work their way through the system and we're really just at the beginning of it. So we're talking about something that could have a multi-year impact and we want to position ourselves in the right way for that. Just real quickly, with regards to this big trade that we've seen in rare earths and these other sort of critical minerals, are you finding opportunity there or is it too early? I think it's still a little bit early. There are some interesting plays. A lot of them are in the private markets, so we'll have to wait and see on that, but we do love alternatives in general within the portfolio. We love that idiosyncratic risk. We think that things that are not highly correlated with what's happening in the AI world also have a good place in the inner portfolio.

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