In a market that could soon be topping out, the best investment idea right now is cash, according to Dan Niles, founder of Niles Investment Management. The market moved higher on Wednesday, but Microsoft shares fell after The Information reported the company was slashing software sales quotas tied to artificial intelligence. Microsoft denied the report . Several other AI-related names sank in sympathy. Shares of Alphabet , however, rose nearly 2%. The moves were the latest in the autumn’s volatile AI trade, which started after investors began to grow concerned over sky-high valuations. “The market is starting to go, ‘you know everybody is not going to win so I need to start differentiating between the Google complex of companies and the OpenAI complex of companies and go, how many winners are there actually going to be. Maybe there will be two or three; it is not going to be 10,'” Niles said in an interview on CNBC’s ” Power Lunch .” “That is why this market feels fragile.” Within tech, he thinks Alphabet-owned Google will be among those that come out on top in the AI race . Alphabet recently released its Gemini 3 AI model and its latest custom silicon chip. GOOGL YTD mountain Alphabet year to date Another interesting stock right now is Apple , Niles said. While it doesn’t have a particularly great AI product right now, that will change. “Next year you are going to have a good product with AI on the system and you are going to have a foldable phone,” he said. Still, with the market broadening out to other sectors, the best thing investors can do is stay diversified — especially since the now-rocky AI trade and Federal Reserve rate cuts have been what’s been pushing the market to new highs. The market is pricing in 89% odds of another rate cut at the conclusion of the central bank’s two-day meeting December 10, according to the CME FedWatch tool . However, Niles doesn’t expect any more cuts after that until a new Fed chair is installed in May. “You have to start thinking a little bit more,” he said. “If you are concerned that December 10 might be the top because that is the last rate cut for the next five months, other than being broadly diversified, cash is not a bad option.”
