"Indeed, valuations are quite high on select AI stocks that have gained high double-digit percentage points so far this year. And the S&P 500 is certainly skewing towards the higher end of the valuation range. But above-average valuation metrics do not necessarily mean that the stock market is about to blow up in devastating fashion, with tech stocks imploding as they did just a quarter of a century ago."
"Indeed, many market participants probably weren't even born when the lead-up to the dot-com bubble happened. And while there are a fair share of horror stories, I do believe that investors should take bubble talk with a fine grain of salt. Indeed, nobody can tell where the market is headed next and what AI is about to do to the broader economy. Can AI fall short of expectations, causing a sell-off in AI stocks over the near term?"
"But I've heard a lot of skeptical views of the current state of the market and growing doubts about whether AI can deliver or if it's just paving the way for a repeat of what happened in 2000 and 2001. Go ahead and try to time the next market crash. But your timing will probably be off, and you may lose out more than if you just played the long game and didn't frighten yourself with all the bearish bubble burst scenarios that could happen."
Select AI stocks have experienced rapid, high double-digit gains while the S&P 500 leans toward higher valuations. Elevated valuation metrics do not guarantee an imminent market collapse or a replay of the dot-com implosion. An AI bubble burst is a plausible risk and has sidelined many investors. Many current market participants did not live through the dot-com buildup, and bubble warnings deserve cautious consideration. No one can predict market direction or AI's economic impacts. AI could underdeliver and trigger near-term sell-offs. Attempts to time a market crash are likely to fail and can produce larger opportunity costs than long-term investing.
Read at 24/7 Wall St.
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