Mark Mobius added his voice to the bubble camp in the debate over the AI trade.

The investor said he predicts as much as a 40% correction in top AI stocks.

He highlighted emerging markets as one area that’s beaten the S&P 500 this year.

Mark Mobius has a warning for AI investors — and one suggestion for where they could put their money instead.

The legendary fund manager and founder of Mobius Capital Partners said he foresaw a big correction coming for top names in the AI space as valuations soar. A correction could tank the top AI stocks by as much as 40%, he said in an interview with Bloomberg Television published Friday.

“When I look at a correction, I look at 30%, down 30%, 40%,” Mobius speculated, though he said he believed in the long-term uptrend for the AI. “That will happen, but it will be short-lived.”

Talk of a stock market correction has grown this week amid a sell-off in the tech sector.

Goldman Sachs CEO David Solomon speculated that the market could drop as much as 20% over the next couple of years. Morgan Stanley’s CEO, Ted Pick, said as much as 15% drawdown was possible, adding that pullbacks were healthy for the overall market.

Mobius said he was mainly concerned about high valuations and heavy spending in the AI space. AI investment at some firms is “probably excessive,” Mobius added, referring to the billions mega-cap tech firms have earmarked for capex this year.

Investors, like Mobius, have been fretting that some AI companies are valued too highly, especially when monetization plans are unclear.

“We’ve got to be prepared for a pullback. And you buy the dip,” Mobius said. “I’d love to see a pullback of 30%, 40%. I would be in there with both arms and legs. We’d be buying a lot.”

In the meantime, there’s one area of the market Mobius thinks could be a promising buy for investors: emerging market stocks.

Emerging markets have outperformed the US market so far this year, Mobius said.

The iShares MSCI Emerging Markets ETF is up 29.7% year-to-date, outpacing the S&P 500’s 13.8% gain.

The index is largely up due to strength in Chinese and Indian stocks, Mobius said. China’s economy is “moving up” the technology ladder, and India is also developing in the computer hardware space — two things that could help fuel a rotation back to EM assets, he suggested.

He also pointed to tailwinds like the Fed cutting rates, which lowers the value of the US dollar relative to other currencies and can give foreign firms more buying power.