This Is How The AI Bull Market Begins
A bull market has three stages.
The first stage is when a new technology or event sparks a change in direction for a sector. It’s when the “smart money” buys in.
The second stage is when it becomes obvious to those paying attention. The stories are in the mainstream financial media. And a lot of investors are buying in.
The third stage is the bubbly part. Everything related is moving up. Everyone is buying in. Valuations become disconnected from reality. And eventually the music stops and it all comes crashing down.
You’ve seen it a lot over the last few years. Crypto and cannabis are two glaring recent examples.
But right now it looks to be starting all over again in AI.
The AI boom has all the markings of the first stage of a bull market.
That’s when there’s a new technology or innovation, but people don’t really understand the scope of.
But the smart money sure does realize what’s about to unfold and it’s buying in big.
That’s what’s been happening recently.
Consider what has been happening to venture stage AI companies.
Their values are ramping up because of the capital flowing into them.
This chart from Fortune magazine shows what’s been happening:
This chart is straightforward.
It shows AI start-up valuations climbing fast.
AI has been a “pipe dream” technology for years.
Throughout that time the median AI company was valued at right around $10 million.
Today it’s more than seven times that at around $80 million.
But even at an $80 million average valuation, it’s still a fraction of what they could be worth in a few years.
AI is a lot like past major technological innovations.
The depth and scope of AI-driven change will be worth tens of trillions of dollars.
That alone could make the entire AI sector a perfect bubble candidate.
However, what could make it a once-in-a-generation bubble with truly epic gains is the speed of the AI bubble.
AI is a unique technology in that most of it is software and many advancements will be self-learning.
Those features add speed to massive scale and it could be a perfect storm of investment booms.
Rising valuations of AI companies is just one of the earlier steps on what could be a long and profitable road.