Investors are seeing huge returns in AI-related stocks, reminiscent of the dot-com bubble. Dan Chung of Alger Funds, now CEO, believes the AI boom still has room to run. Comparing today’s market to the dot-com era, he sees stronger fundamentals and valuations. Microsoft, a constant in both eras, shows more stable growth and lower valuations now. The market environment today looks more stable than in the late 90s, with leading AI companies showing better financial metrics compared to the dot-com leaders. The economy and interest rates also appear more supportive for equities now. The internet leaders mentioned are Amazon, eBay, Yahoo, and Cisco Systems. Nvidia, Microsoft, Amazon, and Google are the AI leaders, with private companies like OpenAI also making strides. Nvidia’s P/E ratio is currently 33.5, with strong fundamentals and growth projections. AI market potential is estimated to reach $2-3 trillion by 2030-31.
During the Dot-Com Bubble, Chung sold Yahoo due to its high 350 P/E ratio. Tariffs may impact prices but not lead to skyrocketing inflation. Reshoring efforts may create a better job market but could potentially unemploy many. Chung recommends holding onto Nvidia stock and also likes Nebius as a leading AI data center company with growth potential. A company left Russia, reorganized in Europe, negotiated loss of Russian business, kept autonomous driving technology. Similar to Softbank, Nebius is growing 400% this year and next, expected to be EBITDA-positive next year. Revenues projected to grow from $500 million in 2025 to over $2.5 billion in 2026. Stock expected to double in 3-4 years. Morningstar does not own shares in mentioned securities.
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1. Morningstar reports that the stock market experienced a sharp decline today, with the S&P 500 falling by 2.5%. Tech stocks were hit particularly hard, with Apple and Amazon both dropping over 5%.
2. According to Morningstar, the latest unemployment numbers show a slight increase in jobless claims, reaching 750,000 last week. This marks the second consecutive week of rising claims, indicating ongoing economic challenges.
3. Morningstar reveals that Tesla’s stock price surged by 10% today after the company announced record-breaking delivery numbers for the first quarter. Tesla delivered 184,800 vehicles, exceeding analysts’ expectations and boosting investor confidence in the electric car maker.: This Is an AI Boom, Not a Bubble, Says Alger Funds CEO Dan Chung