An investor looking at a rising S&P 500 may make a simple assumption: Stick with the biggest U.S. companies that have led the market higher, and hope for more of the same.
Peter Schiff, chief economist and global strategist at Euro Pacific Asset Management and chairman of Schiff Gold, sees this strategy as a risk. He spoke with TheStreet’s Caroline Woods to explain why.
Schiff argues that cap-weighted indexes, which give the largest companies the greatest influence, can make a market look broader and sturdier than it is, when in reality, a small group of AI-linked technology companies is doing much of the lifting.
His answer is not to move entirely into cash or to bet against the S&P 500. Schiff says a smart portfolio (in current market conditions) should hold 10% to 20% in physical precious metals, favor foreign stocks over U.S. stocks, lean toward value investing and emerging markets, and hold less technology than a conventional index fund does. That is a highly opinionated allocation, built around his expectation that inflation, debt, and easier monetary policy will eventually pressure the dollar.
The important distinction for investors is between accepting Schiff’s forecast and understanding the portfolio problem he is trying to solve. A broad U.S. index can deliver gains while also becoming more and more dependent on a narrow group of expensive companies.
Here’s a closer look at how his strategy addresses that concentration risk, and where its trade-offs are most severe.
Why an AI-led S&P 500 can create concentration risk
Schiff’s central stock-market argument begins with index construction. In a cap-weighted index, a company with a larger market value gets a larger portfolio weight. If the biggest technology companies rise, their gains can have an outsized effect on the S&P 500 even when many other stocks are lagging. That structure matters to an investor who believes a broad-market index like the S&P 500 is a diversified bet on the entire U.S. economy.
He attributes the resilience of U.S. stocks to AI-related capital spending, or capex, and to expectations that AI will produce unusually large future profits. Hyperscalers, the giant technology companies that operate vast cloud-computing networks, are among the companies most closely connected to that spending. Schiff’s concern is that valuations leave little room for disappointment if the expected profits arrive more slowly or prove less substantial than investors expect.
As of September 2026, these seven companies — all heavily invested in AI spending — make up nearly 35% of the S&P 500 by weight:
- Nvidia
- Apple
- Microsoft
- Amazon
- Alphabet
- Broadcom
- Meta
“I think the U.S. stock market is being disproportionately led by the AI related companies. And I think if you back them out, then the rest of the market is not doing well. And so that’s why you really can’t just look at these cap weighted indexes that are so disproportionately impacted by these hyperscalers and other tech companies that are directly benefiting from the AI spend.”
—Peter Schiff, when asked why he still views U.S. stocks as vulnerable while the S&P 500 is rising
Schiff isn’t alone in his concern about how AI-heavy American index funds have become. Steve Sosnick, Chief Strategist at Interactive Brokers, shared a similar warning with TheStreet about a week earlier: “Even if you’re putting money into an S&P 500 mutual fund or index fund, you’re about 40% or 45% exposed to the AI trade.”
How an S&P 500 selloff could hit AI-linked tech companies the hardest
Schiff’s point does not establish that the market will fall, and it does not mean that every large technology company is a poor business. It is a warning about the difference between owning an index and knowing what drives it. Investors with sizable S&P 500 holdings can and should examine their overlap with the largest companies before adding separate positions in Nvidia, Microsoft, Amazon, Alphabet Inc., Meta Platforms, or Tesla.
The risk becomes more pronounced in the scenario Schiff described: a broad market decline that prompts investors to redeem shares of index funds to halt their losses. An index fund meeting redemptions sells the stocks it owns in proportion to their weights. Because the largest technology companies are major components of the index, selling can be concentrated in the same names that helped propel the index higher.
“When you sell the S&P, you’ve got the index fund, they’ve got to sell the stocks in the basket, and they’re disproportionately those stocks.”
—Peter Schiff, when asked why a broader stock-market sell-off could hit large technology stocks particularly hard
Why Peter Schiff favors an underweight position in technology
Schiff does not advocate a zero allocation to technology. He says his wealth-management firm, Euro Pacific Asset Management, is underweight technology relative to its representation in relevant indexes, meaning the firm’s portfolios own less of the sector than an index fund would. The approach reflects a valuation judgment rather than a claim that technology has no role in a portfolio.
Samsung Electronics and Taiwan Semiconductor Manufacturing Company illustrate the distinction. Schiff said their price-to-earnings ratios look more attractive to him than those of the Magnificent Seven, the group of dominant U.S. technology-oriented stocks that has been a major focus for investors in recent years. Even so, he said the firm’s holdings in Samsung Electronics and Taiwan Semiconductor Manufacturing Company are underweight compared with their index weights.
Schiff on value vs. growth
Where Schiff would add exposure is in value-oriented basic-materials companies. Value investing generally emphasizes companies whose share prices appear low relative to measures such as earnings or assets, while growth investing puts greater emphasis on the potential for faster future earnings growth.
Neither style wins continuously. The trade-off in Schiff’s proposed tilt is clear: value and foreign stocks can lag U.S. growth stocks for long stretches, as he acknowledged happened during much of the period from roughly 2011 through 2024.
That history is a practical caution. Investors who move away from U.S. mega-cap technology because of valuation concerns need a time horizon that can withstand periods when their alternative holdings trail the S&P 500. A portfolio should not be rebuilt around a forecast if the investor is likely to abandon the plan after a year or two of disappointing relative returns.
How Schiff’s foreign-stock allocation is meant to work
Schiff’s broader preference is for foreign stocks, particularly value stocks from emerging markets. Emerging markets are countries with developing financial markets and economies, rather than the more mature markets typically classified as “developed.” His thesis rests on the view that U.S. shares are expensive and that investors can find better valuations abroad.
He also emphasizes geographic diversification rather than simply buying foreign versions of the same crowded technology space. His preferred areas include basic materials, energy, dividend-paying companies, and companies from select international markets.
For example, he identified Delta Electronics (Thailand) PCL as one of his best-performing holdings and cited Freeport-McMoRan among U.S. companies he personally owns for copper and gold exposure.
Those examples should be treated as illustrations of Schiff’s investment style, not as a ready-made stock list. A past winner does not guarantee a future return, and a foreign allocation introduces its own risks, including currency fluctuations, differing accounting standards, political uncertainty, and periods of weak performance relative to the United States. Investors considering international funds should also check how much exposure they already have through global funds or retirement accounts.
Schiff’s case is strongest for investors whose portfolios have gradually become dominated by U.S. large-cap growth stocks through years of market appreciation. For those investors, the useful action is an inventory: Identify the percentage of total equities tied to the largest U.S. technology companies, then decide whether that percentage matches their risk tolerance.
The decision does not require accepting Schiff’s bearish outlook in full.
Why physical precious metals are the anchor of Schiff’s portfolio
The clearest numerical part of Schiff’s framework is his allocation of physical precious metals. He said investors should generally hold 10% to 20% in physical gold, silver, and similar metals. The range is intended as a portfolio allocation, not a trading call on the next month — or year — of gold prices.
“I would say that people should have 10% to maybe even as much as 20% in physical precious metals. So that’d be gold, silver, stuff like that.”
—Peter Schiff, when asked how he would allocate $10,000 for an everyday retail investor
Schiff’s rationale hinges on real interest rates, which adjust stated interest rates for inflation.
He argues that a small Federal Reserve rate increase would not be negative for gold if inflation rises faster than policy rates, because the inflation-adjusted return available on cash and bonds would still be falling. He also argues that the U.S. government’s debt burden limits how far the Federal Reserve can raise rates without sharply increasing federal interest costs.
That is a macroeconomic thesis, not a certainty. Gold can decline or experience increased volatility, and it produces no income. Owning physical metals can also involve dealer spreads, storage costs, and insurance, and it tends to be less convenient than brokerage-held securities.
An investor using metals as a hedge needs to decide in advance whether the position is insurance against inflation and currency stress, a long-term strategic holding, or a shorter-term price view. Those purposes call for different allocation sizes.
Schiff described a much more severe policy shift as the condition that could change his bullish view: large spending cuts, a sharply smaller Federal Reserve balance sheet, and much tighter monetary policy. He also said such a combination would likely bring falling real estate and stock prices, higher unemployment, and a protracted recession.
His conclusion is that policymakers will avoid that path. Investors should recognize that this conclusion is Schiff’s forecast and that his entire portfolio structure depends heavily on it.
What Schiff would do with bonds, cash & U.S. stocks
After the 10% to 20% allocation to physical precious metals, Schiff said he would overweight equities relative to bonds. He said he prefers short-term, high-quality foreign bonds and suggests allocating about 20% of one’s portfolio to them. Short-term bonds mature sooner, so their prices are generally less sensitive to changes in interest rates than those of longer-term bonds.
The remainder, in his framework, would go to foreign stocks. He said he would favor value over growth and emerging markets over developed markets, while keeping some technology exposure at an underweight level. For the hypothetical portfolio he was asked about, he said he would have no U.S. stock allocation, although he separately noted that his personal holdings include some U.S. oil, tobacco, agricultural, copper, and technology stocks.
That distinction is important. A model allocation offered in a rapid-fire discussion cannot account for an investor’s age, income needs, taxes, pension benefits, mortgage, emergency savings, or existing investments.
Schiff himself asked how large the hypothetical $10,000 investment was relative to the investor’s total assets before giving a general answer. The same question should come before any investor makes a major allocation change.
A decision process for investors concerned about U.S. stock concentration
Schiff’s portfolio is best understood as a concentrated macro view expressed through several holdings: precious metals for a weaker-dollar and inflation scenario, foreign value stocks for a valuation reset between U.S. and overseas markets, and a reduced technology weight for an AI-expectations reversal.
That combination could work well if his assumptions prove broadly correct. It could also trail badly if U.S. technology earnings remain strong, inflation cools, and foreign markets continue to lag.
For a long-term, buy-and-hold investor, the more durable lesson is to separate a portfolio review from a market forecast. First, calculate the actual weight of the largest U.S. companies across every fund and individual stock. Second, decide how much exposure to a single country, sector, and investment style is appropriate. Third, if adding gold, foreign stocks, or bonds, set an allocation that can be maintained through a period of underperformance rather than one based on a near-term price target.
Schiff is asking investors to give up some of the momentum that has rewarded U.S. mega-cap technology ownership in exchange for broader geographic exposure, more value-oriented holdings, and an explicit metals hedge. Whether that trade fits depends less on a prediction about the S&P 500’s next move than on whether an investor’s existing portfolio has already become more concentrated than they intended.
Schiff’s prescription is unusually decisive, but the underlying assumption applies more broadly: Look at your index fund’s weighting, and determine whether it’s actually providing the degree of portfolio diversification you want.
A portfolio built to withstand more than one market outcome may look less exciting when one group of stocks is surging, but it can also reduce the need to make drastic changes after sector leadership reverses.
Related: S&P 500 investors may be more exposed to the AI trade than they think
