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Stock market crash: AI bubble could burst in next 3 years, analyst says

Jan 12, 2025 - markets.businessinsider.com
Tech analyst Gene Munster predicts that the current bubble in tech stocks, driven largely by artificial intelligence, will continue to inflate for another two to three years before bursting around 2027. He anticipates a potential 30% decline in the Nasdaq Composite when the bubble deflates, with hardware stocks like Nvidia likely facing the most severe losses. Munster highlights that while AI is currently a buzzword with limited practical use, its eventual impact on business margins and earnings could sustain the tech trade for a while longer.

Despite the tech sector's impressive growth, with the Nasdaq gaining 29% in 2024 and major tech stocks significantly contributing to the S&P 500's returns, Munster warns of an impending slowdown. He suggests that the market will start to unravel when tech giants like Nvidia fail to meet investor expectations, leading to nervousness and a potential unwinding of the tech trade. While some forecasters warn of a significant market correction, most strategists expect continued, albeit slower, gains in the coming years.

Key takeaways:

  • The tech stock bubble, driven by AI, is expected to last another two to three years before bursting, according to tech analyst Gene Munster.
  • Munster predicts a potential 30% decline in the Nasdaq Composite when the bubble bursts, with hardware stocks like Nvidia facing the most severe losses.
  • The Magnificent Seven group of tech stocks is expected to see significant earnings growth in 2024, but this growth is anticipated to slow down in the following years.
  • Warnings of a stock market bubble are increasing, but most strategists still expect stocks to gain, albeit at a slower pace than in previous years.
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