Recent earnings have reinforced the strength of leading technology and AI-focused companies, pushing their stocks higher and keeping markets near record levels. The excitement is understandable—AI has the potential to transform industries in ways similar to the internet revolution of the late 1990s. Back then, investors rushed to buy into the “new economy,” and while they were ultimately right about the long-term potential, the market experienced a severe crash from 2001 to 2003. Yet, those who held companies like Amazon through the downturn are extremely wealthy today. The lesson is clear: buying quality tech stocks makes sense for the long term, but timing matters. Based on my analysis and the Elliott wave pattern, a correction is likely before the next major leg higher.
This cycle may resemble the dot-com bubble of 2000, though likely less severe. The potential trigger is a disappointment in what AI can realistically deliver. Investors often assume that a breakthrough technology will rapidly displace jobs, boost corporate earnings, and send stock prices surging. But what if AI proves overhyped? In two or three years, the labour market may remain resilient, while companies that poured billions into AI infrastructure could still be struggling to generate a return on their investment. In that scenario, earnings expectations would be sharply downgraded, and the stock market could face a significant correction. I want to buy tech stocks after the correction, not now. When I talk to software engineers they tell me AI is overhyped, there are many things AI can’t do and we will still need humans to work.