[Boom or Bust] Is the AI Revolution's Hype Real? Or Just 2023's Dotcom Bubble?

Nasdaq continues to zoom into the distance, leaving behind the Dow Jones. But is it all good? Find out inside! Picks from the Editor SPONSORED (Newsletter Continues Below) Sponsored [Urgent: Top 7 AI Stocks to Watch and Profit from in 2023]( Time is of the essence in the stock market, and we have an urgent message for you. The AI revolution is here, and it's happening right now. The companies that are leading the way in AI are poised to make enormous profits in the years to come.[Don't Waste This Opportunity]( By clicking the link you are subscribing to The Wealthiest Investor Newsletter and may receive up to 2 additional free bonus subscriptions. Unsubscribing is easy [Privacy Policy/Disclosures]( AI Revolution: Sorting Hype from Reality  Hi Traders,  In case you haven’t known, or been living under a rock the past year, AI is the talk of the town, the belle of the ball, the apple of the financial media's eye. We've got the headlines shouting about generative “AI” and how it's triggering a new “industrial revolution.” Exciting times, right? Ever since ChatGPT popped up on the scene, everyone's been all starry-eyed about AI. I mean, it's even sprucing up our search engines. And don't get me started on those TikTok videos promising to make us millionaires using AI. No wonder stocks linked with AI are skyrocketing. Now, let's take a step back and look at the big picture. When we say "Industrial Revolution," we aren't talking about a continuous event that's been going on since the 1800s. No, it's more like a season finale of your favorite TV show with thrilling cliffhangers and jaw-dropping plot twists. Each twist is a paradigm shift, changing the game entirely. The first shift rolled around in the late 18th century, courtesy of mechanization and steam power. Fast forward a bit, and we're in the early 20th century, with mass production, electricity, and assembly lines shaking things up. Then, post-WWII, we had another game changer with advancements in space exploration, computers, automation, and information technologies. Now, guess what? We're in the middle of the fourth shift, right here, right now. We've got artificial intelligence, intelligent machines, robotics, blockchain, and virtual reality, all transforming our lives in ways we couldn't have dreamed of a decade ago. These shifts have been like goldmines for investors. Every new phase has offered brilliant opportunities to cash in on the latest advancements. Just like a kid in a candy store, investors have been running after the most promising opportunities, leading to impressive market returns that last over a decade. Well, brace yourselves, because we're in the middle of another one of these speculative “booms.” Generative AI has got investors daydreaming about the possibilities. If we draw a parallel with the 1999 “Dot.com/Internet Revolution,” the potential to make big bucks from AI is still ripe for the taking. But here's the catch. As drool-worthy as AI is, there's this little thing called valuation that we can't ignore. Just because we've made progress with space exploration, the internet, or AI doesn't mean we can overlook over-valuation. Throughout history, it's always been the same story - low valuations precede the best investment return periods. Take Microsoft, for example. Back in 1994, investors could snag shares at a price-to-sales ratio of about three. As the internet boomed and the demand for computers skyrocketed, so did Microsoft's sales. Fast forward to today, and Microsoft's shares are trading at more than 11 times price-to-sales. Everyone's expecting AI to bring another boom in revenue. However, this is where we hit a roadblock with valuations. At 11x price-to-sales, there's hardly any room for error. Scott McNeely, the CEO of Sun Microsystems at the peak of the Dot.com revolution, said it best when he pointed out the absurdity of a 10 times revenue valuation, highlighting how it requires pretty much perfect conditions to make sense. The takeaway here is that to maintain a high price-to-sales ratio, a company needs to have astronomical sales growth. The S&P 500 is also chock-full of companies trading at five times sales or higher. Many of these companies are expected to benefit from the adoption of AI, but even with rose-tinted glasses, it's hard to justify the current price tags based on potential revenue growth. Even ChatGPT has chimed in on the issue, warning about the risks of overvaluation and the importance of doing your homework before investing. Or, as the wise old owl Warren Buffett once said, “Price is what you pay. Value is what you get.” So, we've been here before. Remember the frenzy during the initial public offerings? The surge in anything AI-related isn't new. It's like déjà vu for anyone who's lived through two “real” bear markets. Sure, we are in the boom phase of the “AI” market, but current valuations are a red flag. Just like past market phases, the party will eventually end when people realize that, guess what, “valuations matter.” So, here's the deal. A lot of money will be made in “AI” before this ride is over. But remember, it's not a free-for-all. It's important to determine whether the price being paid for assets aligns with their fair value. After all, you don't want to be the one left holding the bag when the music stops.  Keep on keeping up!  John @ Traders on Trend  (In the next article: The Nasdaq has left the Dow Jones in the dust. But is it all good? Find out below! 👇) Sponsored [How He Bagged One Of The Top Trading Records…]( A reclusive millionaire has been quietly racking up winning trade after winning trade. Despite avoiding most headlines, he’s become one of the most successful traders around - over the last 8 years, he’s banked a 97% win rate. How does he do it? He sat down for a rare interview where he revealed it all. [Click HERE to see how he’s done it…]( [Privacy Policy/Disclosures]( Check the Free Presentation Today ☝ SPONSORED Nasdaq Outshines Dow: Largest Margin Since 1991, Implications for Investors?  The Nasdaq Composite is flexing its muscles! It's leading the Dow Jones Industrial Average by a whopping 18.3%, the most significant outperformance since, believe it or not, 1991. Imagine that! The Dow Jones, on the other hand, has not only lost its year-to-date gain but seems to be turning a bit red in the face. The last time it was in the red for the year was way back on May 4. So, the Dow isn't having the best time right now, and it's a bit like watching a drama unfold, isn't it? Now, picture this: the Dow, trailing behind the Nasdaq by such a wide margin, it's like watching a tortoise race a hare - a rare sight indeed! It's been 50 years since we've seen anything like it. In fact, according to Dow Jones Market Data, this is the first time since Nasdaq's launch in 1971 that it's sprinted ahead by over 17% year-to-date through May 16, while the Dow is still putting its jogging shoes on. Let's hop into our time machine and go back to the early 90s, when most of the Nasdaq's current big guns were either not even born yet or were still tiny tots in terms of market capitalization. Case in point, Apple Inc., which was a public company since 1980, was still a little apple seedling.  (article continues below) Sponsored [This Has Won 99.1% Of Trades Over 3 Years]( This new video is causing quite a stir. It exposes a unique trade based on the 4 characters “310F”. These 4 characters hold the secret to the most powerful trade you’ve NEVER heard of. It’s released every Tuesday and could DOUBLE your money by Friday. Over the past 3 years, we’ve won 321 out of 324 of these trades (that’s a 99.1% success rate), with the majority of the trades making 100% or more every 3-10 days. Discover how a simple 10-minute trade on Tuesday could double your money by Friday.[Watch The Full Video Here]( [Privacy Policy/Disclosures]( SPONSORED  🔼 Pay attention, this is worth your time! ☝  (article continues)  Back then, it was the likes of Costco Wholesale Corp, Cisco Systems Inc, and a cocktail of biotech firms that ruled the Nasdaq roost. Both the S&P 500 and Nasdaq Composite had a bit of a stumble during Tuesday's session, but they've had a good run since the start of the year. The S&P 500 is sitting pretty with a gain of over 7%, and the Nasdaq is strutting about with a gain of over 18%. It seems like investors have been throwing their money at a select few tech giants like Apple Inc., Microsoft Corp., Nvidia Corp., and stocks associated with the "FANG+" group. It's like these stocks are the cool kids at the party, stealing all the limelight and accounting for almost all of the market's gains this year. Meanwhile, the other stocks like small-caps, financial services, energy, and healthcare are like the wallflowers, declining since the year's start. It's quite an interesting picture of how the U.S. stock market has become a bit of a one-man show. The top ten stocks in the S&P 500 brought in a staggering 87% of the index's gains in the first quarter. Now, let's get serious for a moment. According to Gene Goldman, CIO of Cetera Financial Group, the market isn't exactly the picture of health right now. He blames a cocktail of factors like expectations for Federal Reserve interest-rate cuts, lower Treasury yields, recession fears, and the AI craze for driving interest in these mammoth technology names. Closing on Tuesday, the Dow was down 336.46 points, or 1%, at 33,012. Nasdaq Composite declined 22.16 points, or 0.2%, to close at 12,343.05, while the S&P 500 shed 26.38 points, or 0.6%, to 4,109.90. As we sit back and watch this financial soap opera unfold, let's remember the old saying - what goes up, must come down. But when and how? That's the million-dollar question!   Disclaimer:  The material in this document is for informational purposes based on our proprietary research. It is not an offering, specific recommendation, or a solicitation of an offer to buy or sell any securities mentioned or discussed herein.  Any performance results discussed herein represent past performance, are not a guarantee of future performance, and are not indicative of any specific investment.  Due to the timing of information presented, any investment performance reflected within this document may be adjusted after the publication and distribution of this material. There can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this communication will be profitable, be equal to any corresponding indicated historical performance levels or be suitable for your portfolio.  Any investment results set forth in this document are not net of expenses and execution costs, nor do they account for other relevant trading or investment fees. 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