Wall Street Celebrates Gains Like It’s 1998 Amid AI Boom

NEW YORK — The S&P 500 is poised to wrap up 2024 with a remarkable gain of nearly 27%, following an impressive year where it reached 50 record highs. This gain builds on the 24.2% increase seen in the previous year, marking a spectacular two-year performance not seen since the dot-com boom.

Unlike the dot-com era, which was driven by internet stocks, today's market surge is fueled by skyrocketing investments in artificial intelligence (AI). A notable example is Nvidia, a company whose stock has more than doubled after seeing a more than threefold increase in value during 2023. Additionally, Super Micro Computer, which manufactures AI server systems, has seen its stock jump nearly 48% this year after tripling last year.

Currently, the economy remains just a step away from its last recession, triggered by the COVID-19 pandemic. However, it has so far dodged a anticipated downturn that many on Wall Street believed would occur after the Federal Reserve raised its main interest rate to the highest level in 20 years, aiming to curb high inflation.

Reflecting on past trends, following the fantastic two-year run in 1998, the market continued to rise. In 1999, it enjoyed a further increase of 19.5% as the economy expanded and the dot-com bubble grew.

Future Outlook for Stocks

Many analysts on Wall Street are optimistic that the stock market may maintain its upward trend into 2025, though likely at a slower pace. The economy continues to grow, and it seems the Federal Reserve will maintain its strategy of cutting interest rates to stimulate the economy. For instance, Jason Draho, head of asset allocation for the Americas at UBS Global Wealth Management, predicts that the S&P 500 could reach 6,600 by the end of 2025, signifying a roughly 9% increase from its recent close.

However, historical patterns show that winning streaks can abruptly end, as seen after 1999. The S&P 500 peaked in early 2000 before facing a downturn that persisted for several years as the dot-com bubble burst, coinciding with the economic recession in 2001.

Critics today argue that the stock market seems overly valued as share prices have risen faster than corporate profits. Also, the S&P 500 has not experienced a significant drop of at least 10% this year, and such market corrections typically happen every few years.

Anthony Saglimbene, chief market strategist at Ameriprise, advocates for cautious optimism. He emphasizes, “At the end of the day, there’s just too much optimism and not enough recognition of what could derail stock momentum for rational investors not to pump the brakes a bit.”

Stan Choe is an AP Business Writer.

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