The artificial intelligence (AI) cycle is shifting, with tech stock multiples no longer soaring. The Nasdaq 100 ETF (QQQ) saw a huge move during the dot-com bubble, but flat returns followed. Now, the AI execution phase is underway, with second-tier AI plays showing signs of exhaustion. Infrastructure investments, like semiconductors, remain solid opportunities.

To manage risk in AI investments, consider using protective strategies like option collars or trailing stops. The QQQ chart appears flat, but dips are still being bought. Looking ahead to 2026, consider strike prices around current levels and evaluate upside potential against downside risk. Using options involves both science and art to navigate the AI market.

Options can provide a 2.5:1 upside/downside ratio in AI investments. While costs of puts are high, breakeven prices must be considered. To protect against a potential AI bust, using options to trade both sides of the market can help manage risks. It’s essential to think strategically and consider all possible outcomes in AI investing.

Read more at Barchart: Will the Momentum Behind AI Stocks Continue in 2026?