When the curtain closes on 2024 in less than two weeks, it’ll likely represent another banner year for Wall Street. The iconic Dow Jones Industrial Average, benchmark S&P 500, and growth-powered Nasdaq Composite have each ascended to multiple record-closing highs this year.
Though there have been a confluence of factors lifting Wall Street’s major indexes to uncharted territory, including better-than-expected corporate earnings, stock-split euphoria, and Donald Trump’s November victory, nothing is creating more buzz than the artificial intelligence (AI) revolution.
The long-term addressable market for AI is practically limitless. Software and systems empowered with AI can become more proficient at their assigned tasks, and can evolve and “learn” without human intervention. It’s why the analysts at PwC estimate AI will add $15.7 trillion to the global economy by the turn of the decade.
In response to this generational opportunity, top-tier AI stocks have soared — and with good reason.
Nvidia (NASDAQ: NVDA) has gained nearly $2.9 trillion in market value since the start of 2023, with the company’s graphics processing units (GPUs) becoming the undisputed top choice in AI-accelerated data centers. Last week, AI networking solutions specialist Broadcom became just the 11th publicly traded company globally to reach a $1 trillion nominal valuation. Meanwhile, AI-driven data-mining specialist Palantir Technologies (NASDAQ: PLTR) is nipping at the heels of a 1,000% gain over the trailing-two-year period.
These represent just some of Wall Street’s prominent tech stocks that have soared on the expectation that demand for AI hardware and software will change the corporate landscape.
But while Nvidia’s and Broadcom’s growth forecasts have knocked even the loftiest analyst expectations out of the park, there are reasons to believe the artificial intelligence bubble will burst in the new year.
Among the catalysts that could halt the nearly parabolic climb AI stocks like Nvidia and Palantir have enjoyed, none stands out more than history. Although history isn’t a timing tool, it does have an immaculate track record of forecasting eventual downside in market-leading businesses on the cutting-edge of next-big-thing innovations.
Approximately 30 years ago, the internet began going mainstream and positively changed the corporate growth arc forever. However, the utility of the internet wasn’t fully understood by businesses for many years, which is why we witnessed the dot-com bubble take shape.
