AI Stocks Are on a Tear — and Experts Say It’s Not a Bubble
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The stock market is soaring this year, and much of those gains are thanks to the excitement surrounding artificial intelligence.
Chipmaker Nvidia's stock is up more than 200% this year, and artificial intelligence (AI) software provider C3 AI's stock is up more than 250%. Stocks of other companies that are putting resources towards AI have jumped, too: Microsoft is up 40%, and Google parent Alphabet is up 37%. Those gains have helped push the S&P 500 index, which is often used as a benchmark for the stock market as a whole, up about 14% in 2023.
For more seasoned investors, these soaring tech stock prices may be reminiscent of the dot-com bubble of the early 2000s. In equities markets, bubbles happen when overvalued assets soar to unsustainable highs before the bubble "pops" and prices fall back down to Earth.
Analysts at Bank of America recently categorized the rise in AI stocks as a "baby bubble." Bubbles are "always started by easy money," they wrote, and "always ended by rate hikes," pointing out that another rate hike from the Federal Reserve is certainly possible this year.
