Why top tech analyst Gene Munster says investors have 2 years before the tech bubble bursts
-
The vesicle tech stocks still have a few years before they break, said tech analyst Gene Munster.
-
A top tech analyst told BI he thinks the Nasdaq could drop as much as 30% when the bubble deflates.
-
Leading hardware stocks like Nvidia are likely to face the biggest losses, he said.
The tech-fueled stock market still has a few years to go before investors’ favorite trade goes off the air.
That’s according to Gene Munster, senior technology analyst and managing partner at Deepwater Asset Management. Munster believes AI has fueled a major tech bubble and it will likely be another two years before it bursts, he told Business Insider.
The collapse — which Munster predicts will come in 2027 — could result in a 30% drop in the Nasdaq Composite as growth slows and the AI hype train grinds to a halt.
When the dust clears, the market’s top hardware stocks, such as Nvidia and other chipmakers, could end up with the biggest losses, he predicted.
“I agree with that Nvidia will have a day of reckoning – and token stocks, the whole trade. And the question for us is not: ‘Will the bubble burst?’ It’s, ‘How high are we going to go before the bubble bursts?'” Munster said.
Munster believes that two to three years is a reasonable time frame for the tech trade to continue to inflate, given that AI is “paradigm-shifting” and that there is still money to be made from AI.
“Today, artificial intelligence is mostly a buzzword for most people. They don’t really use it. Companies talk about implementation, most of them don’t. And when the bottom line of that starts to affect companies, margins should go up, earnings should go up,” he said.
At the same time, the market is giving signs that the exceptional growth of 2024 will not be repeated in the coming years. The Nasdaq gained 29% last year, largely fueled by artificial intelligence mania.
Nvidia, Apple, Amazon, Alphabet and Broadcom — the five tech stocks that were the face of the AI trade — accounted for 46% of the S&P 500’s total return last year, adding about $6 trillion in value, according to the data. Goldman Sachs.
Growth expectations for tech stocks, meanwhile, are outpacing expectations in other areas of the market. The Magnificent Seven is expected to post earnings growth of 33% in 2024, Goldman added, although other stocks in the S&P 500 are expected to post earnings growth of just 3%.
Still, the mega-cap tech group’s earnings are set to fall over the next two years.
Investors are also setting themselves up for disappointment if they think market players can continue to deliver consistent outperformance.
