Wall Street parties like it’s 1998 as AI fuels gains unmatched since dot-com era

recent YORK — The S&P 500 is on track to close 2024 with a boost of nearly 27%, after setting 50 record highs this year. That’s on top of its 24.2% spurt the year before, a spectacular two-year run unmatched since the dot-com boom.

This period around, it’s not dot-com stocks boosting the economy but skyrocketing prices for companies in the artificial-intelligence business. Nvidia, for example, has more than doubled in worth after surging over three times in 2023 because its chips are powering much of the shift into AI. Super Micro Computer, which makes servers used in AI and other computing, has jumped nearly 48% this year after more than tripling last year.

The economy, meanwhile, isn’t far removed from its last decline, which struck with the COVID-19 pandemic. But perhaps more importantly, it’s so far avoided a decline that many on Wall Street worried was inevitable after the Federal safety net hiked its main yield rate to a two-decade high in hopes of slowing the economy to beat high expense boost.

So what happened to stocks after that fantastic two-year run in 1998? The economy rose again in 1999, by 19.5%, as the economy kept growing and the dot-com bubble inflated.

Many voices on Wall Street declare the stake economy could keep rising in 2025 too, though likely not to the same degree.

The economy is still growing, and the Federal safety net appears set to keep cutting yield rates to make things easier. That has Jason Draho, head of resource distribution, Americas, at UBS Global affluence Management, forecasting the S&P 500 could complete 2025 at 6,600, for example. That would be a roughly 9% rise from Monday’s close.

But similar winning streaks have also arrive to a sudden complete in the history, like after 1999. The S&P 500 ended up peaking in early 2000 before falling for several years as the dot-com bubble deflated and the economy fell into its 2001 decline.

Like then, critics this period around are calling the stake economy too expensive after prices climbed faster than companies’ profits. Plus, the S&P 500 hasn’t experienced a drawdown of at least 10% this year, and such “corrections” tend to happen every couple of years.

Anthony Saglimbene, chief economy strategist at Ameriprise, urges caution.

“At the complete of the day, there’s just too much optimism and not enough recognition of what could derail stake momentum for rational investors not to pump the brakes a bit,” Saglimbene said.