Bank of America's European equity strategy chief, Sebastian Raedler, is advising investors to secure protection on their artificial intelligence-driven stock positions without delay. He cautions that every major investment craze over the past two centuries has ultimately concluded in a market collapse.

"This is a very high-stakes game," the strategist remarked in a recent interview. Raedler notes that while a large number of investors feel they have no choice but to remain in the AI trade, they must be ready to pivot quickly at the first hint of a downturn. "People are on edge."

He is urging clients to consider positions in stocks that have been beaten down but could stand to gain considerably if the current boom turns out to be unsustainable. Additionally, Raedler pointed to suggestions from his derivatives team, which propose employing options strategies on defensive sectors, such as consumer staples, as a viable hedging mechanism.

Raedler highlighted that AI has become the single dominant force across all asset classes, including the interest rate market, influencing dynamics in a way he has not witnessed in his two decades of professional experience. This elevated correlation, he warns, could intensify the fallout from any potential crash.

"History shows that when markets are stretched this far, the risk of a reversal is extremely high, and it becomes very difficult to exit in time," he said. "My advice is to hedge right now."

On the corporate earnings front, the strategist explained that the current strength in profitability, despite a sluggish macroeconomic backdrop, has a clear driver: a timing mismatch created by the massive capital expenditures of hyperscale cloud providers, where revenues are being recognized before the associated costs.

This dynamic, he asserts, is breeding a "margin euphoria" that is artificially inflating profit figures. Raedler has maintained a broadly cautious outlook on European equities in recent years. His team previously forecast a decline of more than 10% for the Stoxx Europe 600 index in the fourth quarter of 2025, yet the benchmark index went on to rally by more than 7% during that period.