AI Bull Market to Continue for 2-4 Years, Says Intelligent Alpha CEO

Doug Clinton, CEO of Intelligent Alpha and executive partner at Deepwater Asset Management, has asserted that the artificial intelligence (AI) bull market is set to continue for another two to four years. This assertion comes at a time when there are growing concerns about the potential for an AI bubble. Clinton, however, believes that the more critical question is whether the current bull market has reached its end, to which he firmly responds that it has not.

Clinton's optimism is bolstered by his model's prediction that NVIDIA, a leading AI chip manufacturer, will exceed market expectations in both revenue and earnings per share in its upcoming financial report. Despite NVIDIA's relatively high expected price-to-earnings ratio, Clinton argues that its valuation remains reasonable when compared to other tech giants. Excluding Tesla, the expected price-to-earnings ratio for the six major tech companies is approximately 28.5 times, while NVIDIA's is over 30 times. However, Clinton notes that NVIDIA's expansion is not as aggressive as that of its competitors.

Clinton acknowledges that while the long-term trend for AI is upward, the market will experience periods of volatility, moving above and below average levels. He observes that the current market may be slightly overheated, although it has cooled down in recent weeks. This cooling period has allowed him to pause and reflect on some of the truly significant areas within the AI sector.

In addition to large-cap stocks, Clinton highlights two investment opportunities. Datadog, a software company closely tied to AI, has had a challenging year, making it an attractive investment target. First Solar, a non-AI stock, is poised to benefit from the expansion of U.S. manufacturing. Clinton's insights suggest a balanced approach to investing in AI, considering both the potential for growth and the need for caution in an overheated market.