The AI trend is far from over… that's why you should invest like it's the summer of 1996!

From the desk of Miles Everson:

Hi, everyone!

Happy Wednesday!

I’m excited to share with you another helpful investment insight in today’s article. I believe this is something that will help us maximize our wealth in the long term.

Are you ready?

Keep reading below to learn how and why you should invest like it’s the summer of 1996.

The AI trend is far from over… that's why you should invest like it's the summer of 1996!

Are you familiar with Marc Andreessen?

For a brief context: Andreessen was instrumental in launching the dot-com era boom. He co-founded the first big Internet browser company,  Netscape, in 1994.

Netscape helped set off the next six years of stellar market returns, which most know as the dot-com bubble. At that time, companies set out to build the next big Internet business in any way they could.

Because of that, the stock market continued to rally hard for years… until people realized how many so-called Internet companies were still half-baked ideas.

Does this sound familiar?

According to  Rob Spivey , Director of Research at  Valens Research, in a coaching comment delivered in July 2024, we’re about a year and a half into the artificial intelligence (AI) rally. Yet, some of the biggest tech companies investing in AI have started to stumble.

In fact, market darling  Nvidia  went down 12% in June 2024… and where it went, it felt like the rest of AI went, too.

As it had been in the past, the market was quick to react to headlines. Many folks wondered if the AI hype train had run its course.

However, Andreessen wasn’t convinced with this… and neither was Spivey and his team.

Getting a Second Shot at Building the Future of Tech

Andreessen said every idea from the dot-com bubble would work today.

Of course, some companies actually survived and turned into the Big Tech giants we know now.  Amazon  and  Google  parent  Alphabet  are great examples.

However, plenty of dot-com failures were also in the right place at the wrong time.

Examples:

Pets.com  promised to deliver pet supplies from the Internet. It was basically a precursor to  Chewy. Nowadays, though, you can buy pet supplies on Amazon.

Back in 2000, a company called  pop.com  tried building a service to stream video clips… and failed spectacularly. Today,  Netflix  and  YouTube  are among the most valuable businesses on Earth.

Andreessen saw such similarities between the dot-com era and the AI revolution. Both were kicked off by a landmark moment—Netscape in the 1990s and  ChatGPT  in 2022. Both featured plenty of hype-chasing businesses desperate to win investor cash.

However, for Andreessen, the big difference between these two eras is TECHNOLOGY. He believes we’re now capable of making a lot more “crazy ideas” work this time around.

This explains why while many wondered if the AI hype train had already run its course, Andreessen’s “ a16z ” venture-capital fund was investing aggressively.

Late 2023, it funneled more than USD 400 million into  Mistral AI, a large language model company competing with  OpenAI  and others. In May 2024, a16z invested in  Yellow, an AI-powered 3D-graphics company.

Andreessen seemed to expect this market to follow the dot-com pattern—just take a look at the chart below. As you can see, once investors grasped how transformational Netscape could be, they piled in.

The tech-heavy Nasdaq Composite Index climbed a little over 60% from December 1994 through mid-1996.

Many were already calling for a bubble and stock market mania. They thought the biggest move had already happened, yet this was all a lot of excitement over nothing.

In fact, Nobel Prize-winning economist Paul Krugman predicted in the late 1990s that the Internet’s value to the economy wouldn’t be much greater than the fax machine’s.

According to Spivey, that’s about where we are in today’s market. OpenAI released ChatGPT to the public on November 30, 2022.

A year and a half after that, the Nasdaq went up about 60%…

Many of you probably know what happened to the Nasdaq through the market peak in late March 2000. From that fateful launch in mid-December 1994, the Nasdaq rallied almost 600%.

… and if history is anything to go by, Spivey believes we’re in for a lot more upside.

So, don’t count out the AI explosion yet!

According to Spivey, we’re still in the early innings of this unprecedented boom.

Remember: It’s not only about the biggest AI players. Plenty of smaller beneficiaries will also soar to new heights.

… and keep an eye out for less-popular AI stocks backed by powerful businesses.

As we all can see, the AI trend is far from over.

Hope you’ve found this week’s insights interesting and helpful.

Stay tuned for next Wednesday’s The Independent Investor!

Back in its infancy, the Internet was an emerging technology with HUGE implications that wasn’t taken seriously by many companies.

Learn more about  why AI is more than just “the next BIG thing” in tech  in next week’s article!