AI stocks like Microsoft, Nvidia, Alphabet, Amazon, and Meta Platforms show strong growth potential

From Nasdaq.: 2024-07-24 05:12:00

The S&P 500 has surged 45% since January 2023, driven by gains in top AI stocks like Microsoft (85%), Nvidia (745%), Alphabet (106%), Amazon (117%), and Meta Platforms (305%). Analysts warn of similarities to the dot-com bubble, but note practical use cases could prevent a crash, following the Gartner Hype Cycle.

Valuations for AI stocks and the S&P 500 are high, but not as extreme as during the dot-com bubble. Tech stocks trade at 29.7 times forward earnings, compared to 55 times in 2000. Profits and infrastructure differentiate today’s AI companies from the dot-com era, suggesting a less severe downturn is likely.

Investors should anticipate a stock market downturn, potentially led by AI stocks, though the timeline is uncertain. Despite possible declines, historical returns show that buying into strong companies like Amazon and Microsoft during a downturn can lead to significant long-term gains.

Consider diversifying investments beyond the S&P 500 Index, as analysts identify other stocks with high growth potential. The Motley Fool Stock Advisor service has outperformed the S&P 500 since 2002, providing expert guidance and stock recommendations that have delivered significant returns. Don’t miss out on the next big investment opportunity.



Read more at Nasdaq.: The Stock Market Crashed After the Dot-Com Bubble. Will Artificial Intelligence (AI) Stocks Cause a Similar Market Crash?