AI companies' strategies with traditional vs. digital assets amid geopolitical and banking crises

• Published in: Heliyon 2024-12, Vol.10 (23), p.e40382, Article e40382
• Main Authors: Dammak, Wael, Fakhfekh, Mohamed, Alnafisah, Hind, Jeribi, Ahmed
• Format: Article
• Language: English
• Subjects: Crises; Digital assets; G01; G10; G11; Hedging; Intelligence artificial companies; Safe haven; Traditional assets
• ISSN: 2405-8440; 2405-8440
• DOI: 10.1016/j.heliyon.2024.e40382

The financial industry evolves rapidly, offering numerous opportunities but also introducing inherent risks that require careful navigation by institutions. This paper explores the performance of traditional and digital assets as tools for hedging, diversification, and safe-haven strategies during the Russian-Ukrainian crisis and the Silicon Valley Bank (SVB) collapse. Utilizing daily data from April 30, 2021, to September 15, 2023, and employing the Asymmetric Dynamic Conditional Correlation (ADCC) model, which combines four Generalized Autoregressive Conditional Heteroskedasticity (GARCH) family models and two residual distributions, we conduct a comprehensive analysis. The results indicate that Bitcoin's role as a safe haven is limited during the geopolitical crisis, impacting specific stocks, while gold's effectiveness varies. Digix Gold (DGX) demonstrates robust safe-haven properties, and Paxos Gold (PAXG) proves notably effective for certain stocks. Before the SVB crisis, gold primarily acts as a diversifier but later emerges as a significant safe haven during the banking crisis. These findings provide valuable insights to portfolio managers, emphasizing the importance of adaptive asset allocation in addressing financial uncertainties. •AI sector is rapidly growing, attracting substantial investor interest.•Strategies for diversifying portfolios heavily focused on AI.•The potential of gold, Bitcoin, and gold-backed cryptocurrencies for diversification in AI-centered portfolios.•Dynamic correlations between AI firms and alternative investments.•PAXG and gold emerge as effective hedges, particularly during periods of uncertainty, advocating for dynamic portfolio management.