Bond King Jeffrey Gundlach Wants Out of the AI 'Epicenter': Inside His Zero-Exposure Portfolio

The DoubleLine Capital founder and CEO Jeffrey Gundlach, also known as the Bond King, said he wants to be “out of the epicenter” of the AI race, citing widening credit spreads and extreme valuations. Escalating AI Credit Cracks Speaking on The Julia La Roche Show, Gundlach cited the S&P 500 Shiller CAPE ratio exceeding 42 as a historical indicator of negative real returns over the coming decade. While broad junk bonds remain resilient, debt linked to AI borrowing and corporate issuers like Oracle Corp. (NYSE:ORCL) have experienced visible spread widening as the bond market rejects aggressive pricing. "You’re going to have fallout and losers in the AI, you know, race for the holy grail," Gundlach said. "I think we’re close enough to there that I want to be out of the epicenter." The AI space is currently dominated by companies like Nvidia Corp. (NASDAQ:NVDA), Alphabet Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL), Meta Platforms Inc. (NASDAQ:META), and Microsoft Corp. (NASDAQ:MSFT), among others. Read Also: Trump’s Tariff Threat Over Fed Rate Decision ‘Makes No Economic Sense,’ Says Justin Wolfers: Kevin Warsh 'Called His Bluff’ Strategic Zero-AI Portfolio Allocation “What I am recommending now is 30% in one thing equal weighted index. It is the Fortune 500 index,” said Gundlach, adding that “so you don’t have 40% of your portfolio in AI, you have almost nothing.” The Fortune 500 is tracked by ETFs like the DoubleLine Fortune 500 Equal Weight ETF (NYSE:DFVE). His remaining portfolio allocates 30% to fixed income, split evenly between low-risk core bonds and local-currency emerging market debt, which is tracked by ETFs like VanEck JP Morgan EM Local Currency Bond ETF (NYSE:EMLC). Real assets account for 20%, split between physical gold, often tracked by ETFs like SPDR Gold Trust (NYSE:GLD) and the DoubleLine Commodity Strategy ETF (NYSE:DCMT). The remaining 20% serves as “dry powder,” split between the DoubleLine Commercial Real Estate ETF (NYSE:DCRE) and the DoubleLine Flexible Income I (NASDAQ:DFLEX). Private Credit and Rating Arbitrage Warnings Gundlach also warned of systemic vulnerabilities in private credit, citing rating agency arbitrage that echoes structural flaws seen during the 2008 financial crisis with underwriters like Wells Fargo. How Have Stocks and Bonds Performed in 2026? At the last check, the 30-year Treasury bond yielded 5.32%, the 10-year Treasury bond was at 4.97%, and the two-year bond was at 4.71%. The S&P 500 index has advanced 10.11% year-to-date. Similarly, the Nasdaq Composite index was up 11.80%, and the Dow Jones gained 6.36% YTD. On Wednesday, the SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 and Nasdaq-100, respectively, closed mixed. SPY fell 0.44% to $754.05, while QQQ rose 0.026% to $704.72. Meanwhile, the Dow tracker, State Street SPDR Dow Jones Industrial Average ETF Trust (NYSE:DIA), also ended 1.15% lower at $515.22. On Thursday, SPY is up about 0.92%, QQQ gained 1.32%, and DIA advanced 0.44%. Read Also: S&P 500 Could Deliver Another 6% by Year-End as JPMorgan Calls Bears an ‘Extinct Species’ — Polymarket Bettors Price 35% Odds Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. Image via Shutterstock