Despite recent setbacks in the artificial intelligence (AI) sector, market experts remain optimistic about a rebound. According to John Higgins, Chief Market Economist at Capital Economics, the current dip in AI-related stocks mirrors the pullback experienced by tech stocks in 1998 rather than the dramatic decline seen in the dot-com bubble of 2000.
“The recent downturn in AI stocks feels more like the temporary decline observed in 1998, rather than the severe crash of 2000,” Higgins noted in a report shared with MarketWatch. He believes that the stock market is poised for recovery, as economic conditions prove stronger than anticipated and investor enthusiasm for AI technologies is likely to rebound.
Earlier this year, stocks tied to AI advancements, including Nvidia Corp. (NVDA), played a significant role in driving major indexes like the S&P 500 and Nasdaq Composite to record highs. Nvidia, in particular, contributed heavily to the market’s gains. However, as the market has recently dipped from its mid-July peaks, many AI stocks have led the decline.
This recent selloff has been fueled by concerns over the U.S. economy’s strength, exacerbated by weaker-than-expected labor market data. Additionally, doubts about the long-term benefits of substantial investments by companies like Alphabet Inc. (GOOGL) in AI infrastructure have contributed to the market’s uncertainty. Despite these challenges, Higgins suggests that the AI trade is not finished but merely experiencing a temporary slowdown before it resumes its upward trajectory.
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