The Momentum
Deepwater Asset Management’s Gene Munster believes we are at the beginning of a multi-year bull run powered by AI that could result in the Nasdaq doubling or tripling from current levels.
Key Developments
What To Know: The Nasdaq Composite gained approximately 43% in 2023 and is already off to a strong start in 2024. The Nasdaq 100, tracked by the Invesco QQQ Trust QQQ, soared more than 50% last year as AI adoption and increased focus on efficiency helped drive some of the biggest tech stocks higher.
Munster believes the AI-powered rally in the Nasdaq is just getting started. He suggested on Wednesday that the Nasdaq could be trading as high as 45000 in as little as two years.
The AI Revolution
“We talk about the negative lever related to inflation, but there is a massive positive lever related to AI,” Munster said Wednesday on CNBC’s “Squawk Box.”
To better understand the magnitude of the paradigm shift that is taking place, investors should put AI on a spectrum, Munster said. He ranked the personal computer revolution as 20 out of 100 in terms of magnitude, the mobile phone at 25, the internet at 50, electricity at 100 and AI at 99.
“It would be 100 if not for you need electricity to power AI,” the tech analyst said.
Given that perspective, there’s no reason to worry about what is going to happen with inflation over the next three to six months, he said.
The Projections
“If this is as big of a paradigm shift as I think it is — even if it’s half as big — I think we could see the Nasdaq move up considerably: 2x in the next two to three years,” Munster said.
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CNBC pressed him on the massive call, asking the analyst to clarify if he was saying he expects the Nasdaq Composite to trade as high as “30000 or 45000” in the next couple of years.
Munster explained he believes we are at the front end of a three- to five-year bull market that will ultimately end in a bubble. The Nasdaq peaked at 100 times earnings during the dot-com bubble. The QQQs are currently trading around 28 times earnings, he said.
The Transformation
“If I’m right that this is in fact much bigger than what the internet is, you can build a case that there will be capital rushing in to enable this, AI, and you will see a bubble emerging,” Munster said.
“And so whether it’s a 2x or a 3x, I don’t know what it is, but I do know that AI is going to be transformative and power the market higher.”
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QQQ Price Action: The Invesco QQQ Trust was up 0.71% at $431.60 at the time of publication Wednesday, according to Benzinga Pro.
This illustration was generated using artificial intelligence via MidJourney.
