Artificial Intelligence (AI) is estimated to contribute up to $15.7 trillion to the global economy by 2030, presenting substantial investment opportunities. Nvidia (NASDAQ: NVDA) recently became the first public company to surpass a market cap of $5 trillion, while Palantir Technologies (NASDAQ: PLTR) has seen its shares rise approximately 2,760% since the start of 2023. Nvidia commands over 90% of the graphics processing units in enterprise data centers, with ambitions to release advanced AI chips annually post-2026.
Historical trends indicate that tech stocks related to emerging technologies, including AI, are susceptible to bubble scenarios. In the lead-up to the dot-com bubble, leading companies saw their price-to-sales (P/S) ratios soar above 30, unsustainable in the long run. Currently, Nvidia’s P/S ratio is 23, while Palantir’s is 120, suggesting that their premium valuations may not hold. If the historical pattern continues, both companies face a potential downturn by 2026 as businesses work to optimize their AI solutions.
