That’s the big question, according to Gene Munster, managing partner of Deepwater Asset Management. This revolutionary technology was the catalyst for two years of spectacular gains in the stock markets. With major stock indexes trading near all-time highs, excessive valuations are causing growing nervousness in the investment community.
Nothing has been more impactful than the emergence of artificial intelligence (AI). Although the stock market was boosted by various factors, such as Donald Trump’s victory in November, stock split euphoria, dovish Fed policy and better-than-expected earnings, AI triggered breathtaking valuations. Nonetheless, a potential correction from current highs is on the horizon.
“I agree that Nvidia will have a day of reckoning – and chip stocks, the whole business. And the question for us is not, ‘Will the bubble burst?’ It’s : “How far will we go before the bubble bursts” says Munster.
While the overall market has declined significantly since its peak late last year, Munster insists it will take two more years of solid gains before a potential bubble bursts. According to the technology analyst, the bursting of the bubble could lead to a 30% drop in the technology-heavy NASDAQ index due to the end of the hype over artificial intelligence.
Stock market momentum has softened significantly in recent months, particularly among the big five tech stocks, and the market is signaling that the extraordinary growth and gains of 2024 will be difficult to replicate in 2025. Amid these stock market concerns, growth, investors should focus on AI trading at depressed valuations and in companies supported by strong financials and long-term growth opportunities.
Bank of America analysts remain optimistic about the outlook for the U.S. software market, despite slowing growth rates in recent months. While the sector grew 59% in 2023, attributed to the AI frenzy, the growth rate slowed to 23% in 2024. However, given that the multiples are still lower than expected, there are still opportunities to unlock.
“Revenue multiples and growth expectations remain below 5-year median and pre-Covid levels,” the bank said in its January 14 report, highlighting the potential of three secular themes for 2025: Agentic AI, the growth of enterprise IT budgets and sustained growth. migration to the cloud.
According to the bank, tech heavyweights’ massive spending on AI and increasing their investments in 2025 is one of the factors expected to fuel the growth of the software sector. Likewise, analysts expect sustainable migration to the cloud to be a key driver of the software industry.
“While we remain selective on small caps, we are bullish on the software sector for 2025, particularly in the second half, as accelerating secular tailwinds and easing cyclical headwinds converge,” added the society.
Our methodology
For this article, we selected AI stocks by looking through news articles, stock analyses, and press releases. These stocks are also popular among hedge funds.
Why are we interested in stocks that hedge funds are piling into? The reason is simple: our research has shown that we can outperform the market by imitating the stocks selected by the best hedge funds. Our quarterly newsletter strategy selects 14 small and large cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Is MicroStrategy Incorporated (MSTR) the Stock That Will Go to the Moon According to Reddit?
A software engineer wearing a headset, collaborating with a remote team on a project.
Number of hedge fund holders: 25
MicroStrategy Incorporated (NASDAQ: MSTR) provides artificial intelligence-driven business analytics software and services. It offers MicroStrategy ONE, which provides non-technical users with the ability to directly access new and actionable information for decision-making. On January 13, Cantor Fitzgerald analyst Brett Knoblauch reiterated a Buy rating on the stock with a price target of $613 above an average price target of $513. Known for its massive Bitcoin holdings, the company has integrated cutting-edge AI technologies into its financial strategy.
To improve MicroStrategy Incorporated’s (NASDAQ: MSTR) strategic actions in the erratic cryptocurrency market, artificial intelligence can play a key role in predicting market trends, assessing risks, and even determining the best times to buy or sell assets. MicroStrategy demonstrates its commitment to transforming theoretical potentials into practical insights by integrating AI. Data-driven decisions are the way of the future and artificial intelligence (AI) provides a sophisticated roadmap for trading the intricacies of the financial market.
Global MSTR ranks 7th on our list of AI stocks to watch before a possible market correction. While we recognize the potential of MSTR as an investment, our conviction lies in the belief that certain AI stocks hold more promise in terms of higher returns and in a shorter time frame. If you’re looking for an AI stock that’s more promising than MSTR but is trading at less than 5x earnings, check out our report on cheapest AI stock.
