The host put it to Kristy Akullian that semiconductors have given back two thirds of their bounce off the summer lows, and that AI baskets, including the ones in her own firm's funds, are down about 20%.
The instinct after a drawdown that size is to wait. Akullian's argument runs the other way: earnings rose faster than prices did, so the same exposure costs less today than it did before the capital spending started showing up as revenue.
"So even though it may feel like an uncomfortable time to allocate, we're actually seeing valuations relatively low and even a bit lower today."
Akullian is BlackRock's head of iShares investment strategy for the Americas, so the funds she names in this segment are ones her own firm runs and she has to defend.
I listened to the full segment so you can skip it.
Here are the 6 takeaways that matter.
👤 Guest: Kristy Akullian, BlackRock's head of iShares investment strategy for the Americas
📰 Published: 1 September 2026 on CNBC (Closing Bell Overtime)
🟣 Apple Podcasts | 🔗 Episode page | ⏱️ 4 min
Key Takeaways
Second-quarter earnings were the moment AI capital spending started turning into revenue She also read the results as evidence that the gains are spreading rather than concentrating
The pullback made the AI trade cheaper, because prices did not keep up with fundamentals Her line is that it feels uncomfortable to allocate and the valuations say otherwise
A high-dividend fund has been moving opposite the semiconductor index Near-term cash flows are the counterweight to a trade priced on expectations years out
Higher yields are her reason to own balance-sheet quality in equities
Hedge-fund-style funds are how she wants to trade an AI market that produces losers as well as winners Going long and short captures the spread between them rather than the market's direction
Bonds still earn their place on yield, but she relies on them less to steady a portfolio The reason is days like this one, when stocks and bonds fall together
1. Capex is becoming revenue
Asked how to judge the AI theme when higher rates, higher oil and a sharp pullback in semiconductors are all working against it, Akullian started with the earnings rather than the price action.
The second-quarter results are what she points at, and the specific thing she wanted to see was revenue. Akullian said the enormous amounts of capital spending put into the AI trade are now translating into revenues, and that this was the important part of the quarter
She also read the results as evidence the theme is widening rather than narrowing. Akullian said "we don't think that the AI story is necessarily one that's becoming more zero sum" — "It's becoming broader."
Her conclusion from the quarter is about duration of the trend, not the next quarter. She said it gave her firm a large amount of confidence that this is a longer-lasting trend
2. Prices lag the fundamentals
The stocks did not get paid for the earnings, which is the whole valuation argument. "You know, we haven't seen prices rise as much as fundamentals."
That is why she treats an uncomfortable entry point as the opportunity. "So even though it may feel like an uncomfortable time to allocate, we're actually seeing valuations relatively low and even a bit lower today."
She still ranks AI first for growth, both in a portfolio and outside one. Akullian said it remains the number one source of growth in a portfolio and in the economy
3. Dividends against the chips
Coming back after the break, the host said a day when stocks and bonds fall together sharpens the need to diversify, and asked for the solution. Akullian gave two, and the first is inside the equity allocation.
Her first approach is to diversify within equities rather than out of them. "I think there's two approaches that investors should take right now. One is diversifying within your equity sleeve."
The dividend fund is her example, and the reason is how it has traded against semiconductors. "So something like HDV, which is our iShares high dividend fund." She added: "You know, we've actually seen that be pretty negatively correlated to something like the SOX, the semiconductors index." A negative correlation here means the two have tended to move in opposite directions, so one cushions the other
The mechanism she gives is the timing of the cash, not the sector. Prioritizing near-term cash flows is the counterbalance to the long-dated expectations built into the AI trade
The more concentrated the index becomes, the more she wants the offset. "So the more your portfolio and the more some of the indices look a little bit more concentrated in AI, the more we see an opportunity to offset some of that with different drivers, different sources of risk and return."
4. Quality when yields rise
Rising yields are her trigger for moving up in quality within equities. "I think that today is another day where as yields move higher, we lean higher quality as well in the equity market."
She named the fund and the two screens behind it. "So something like QUAL, which is our high quality factor fund that can filter for strong balance sheets for low variability of earnings. It's set up to perform better when interest rates are higher." Low variability of earnings means profits that do not swing much from year to year, which is what makes a company less sensitive to its own borrowing costs
5. Long and short in one fund
Her second approach is outside the stock and bond split altogether.
The case for alternatives, she said, is exactly a day when both of the usual holdings fall at once. "We certainly see the case for alts again, kind of on a day like today where we're seeing stocks and bonds both sell off simultaneously."
What she wants there is hedge-fund-style strategies packaged as an exchange-traded fund. Those give "the ability to go both long and short in an environment like this where AI is really creating winners and losers" Her argument is that this captures the gap between the winners and the losers rather than the direction of the market as a whole
She described these as genuinely different drivers of risk and return, which is what makes them add diversification rather than more of the same
6. Bonds are less of an offset
The host asked whether these strategies take the place of part of a fixed income allocation.
Akullian said bonds keep their place on yield, and lose part of their old job. "I mean, we certainly see room for fixed income. We see higher opportunity in some higher yields, but we're reliant less upon it for the ballast that may be used to provide in the past." The stabilizing role she is describing is the one bonds play when they rise as stocks fall, which is what did not happen on the day of this segment
Bonus Insights
The show's own numbers on how far the AI trade had pulled back set up the whole conversation. The host said of semiconductors: "They've given back two thirds of their recent bounce from the summertime lows, AI baskets, such as the ones in your funds have also come down about 20%."
The host closed on the other side of the rate move. "More income available from fixed income every day, it seems."
Akullian's bottom line is that the AI theme is intact and cheaper than it was, and that the way to hold it now is alongside dividends, balance-sheet quality and long-short funds rather than alongside bonds.
Products, Companies & Tools Mentioned
iShares Core High Dividend ETF (The fund she calls HDV, which she says has been negatively correlated to the semiconductor index)
iShares MSCI USA Quality Factor ETF (The fund she calls QUAL, screening for strong balance sheets and low variability of earnings, which she says suits higher interest rates)
BlackRock (Akullian's firm, whose iShares AI baskets the host said are down about 20%)
The SOX semiconductor index (Her benchmark for the AI trade, and the thing she says the dividend fund has moved against)
If this was worth your time, send it to someone who has to have a view on this.
Get the latest market chatter as it happens: