Artificial intelligence (AI) has been driving stock market gains for the past two years, leading to surges in AI-related companies like Nvidia, AMD, Microsoft, Alphabet, and Meta. However, if the AI bubble were to burst, a correction could lead to a 10% to 20% fall in the S&P 500 and Nasdaq, similar to the dot-com bubble burst of the early 2000s.

The ripple effects of an AI market correction would impact startups, with venture funding decreasing and many AI startups potentially failing. Larger companies with strong balance sheets could benefit by acquiring talent or intellectual property. While a complete collapse similar to 2000 or 2008 is less likely, a sharp correction in AI stocks is more probable.

Despite the likelihood of a sharp correction, a complete bubble collapse in the AI market is less likely. AI already holds real commercial value, with early gains seen across industries. Everyday investors are advised to expect volatility and maintain a diversified portfolio, balanced allocation, and a long-term time horizon for protection against market fluctuations.

Read more at Yahoo Finance: I Asked ChatGPT What Will Happen To the Stock Market If the AI Bubble Bursts