A massive melt-up may be occurring as investors pile into AI-related stocks, Ed Yardeni wrote.
Such “Mother of All Melt-ups” tend to occur come at the end of a bull market, he said.
“We sure hope this bull market doesn’t get there too far ahead of schedule.”
Investor bullishness on artificial intelligence stocks may be fueling another “Mother of All Melt-ups,” according to Yardeni Research President Ed Yardeni.
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Yardeni Research coined the term in 2013, when it predicted a massive market upswing fueled by central bank liquidity. That so-called MAMU ended as the pandemic hit in February 2020.
A new MAMU began soon after that in March 2020 as the Federal Reserve unleashed another round of monetary stimulus. But it ended in January 2022, when “investors started to conclude that nothing is forever in the stock market,” Yardeni wrote in a Sunday blog post.
“Now that the latest fiscal cliff has been averted, is another MAMU underway led by stocks that are AI frenzy plays? Maybe,” he said
That’s as the S&P 500 has jumped 19.7% after bottoming in October, while the Nasdaq 100 is up 29.6% after a December low, he added.
To varying degrees, most of those companies have a focus in AI, whether creating the computer chips to develop the technology or implementing AI into their existing services.
And after reaching a combined market cap of $10.7 trillion through Friday’s close, those eight stocks alone account for a record 26.6% of the S&P 500, Yardeni noted.
“Since the start of this year, we have been targeting 4600 on the S&P 500 by the end of this year,” he said. “That was and still is a contrary call. We sure hope this bull market doesn’t get there too far ahead of schedule. Past MAMUs have always occurred at the end of bull markets, not when they are just starting.”
Big-name investors are going all-in on AI
Some of the best-known names in investing are betting big on artificial intelligence stocks.
Bill Ackman recently revealed a $1 billion bet on Google parent Alphabet, while Stanley Druckenmiller pumped a combined $430 million into Microsoft and Nvidia.
Tiger Global founder Chase Coleman, billionaire trader Paul Tudor Jones, and Ark Invest CIO Cathie Wood are all bullish on AI.
Some of the biggest names in investing are piling into artificial intelligence, the theme that has taken markets by storm in 2023.
Billionaire investors including Bill Ackman, Stanley Druckenmiller and David Tepper are betting big on firms at the forefront of the AI race – such as Microsoft, Alphabet and chipmaker Nvidia.
Here’s how seven top players are responding to the AI trend:
1. Bill Ackman
Ackman’s hedge fund revealed Monday that it had plowed over $1 billion into Alphabet in a quarter where the tech giant significantly ramped up its AI efforts.
Pershing Square Capital Management snapped up more than 10 million shares in Google’s parent company – buying about 2.2 million Class A shares and 8.1 million Class C shares, according to a Securities and Exchange Commission filing.
Hedge fund billionaire Coleman said last month that mega-cap stocks like Amazon now look like a good bet again after a brutal 2022, thanks to the rise of AI.
The Tiger Global founder told investors to buy the so-called FAANG stocks – shorthand for Facebook parent Meta, Apple, Amazon, Netflix, and Alphabet – and cited Amazon sellers’ use of ChatGPT to write product listings as an example of how AI was already boosting Big Tech.
3. Stanley Druckenmiller
Druckenmiller loaded up on Nvidia shares and made a new investment in Microsoft last quarter, snapping up two of the best-performing stocks of 2023.
The billionaire investor’s Duquesne Family Office bought a $220 million stake in Nvidia and upped its Microsoft position by $210 million, according to its latest 13F filing, released Monday.
Nvidia, the world’s No. 1 producer of graphics chips needed for high-intensity AI computing, has seen its share price double this year. Microsoft, which was an early investor in OpenAI and has integrated ChatGPT technology into its search engine Bing, is up 30%.
4. Paul Tudor Jones
Large language AI models like ChatGPT will have a massive impact on both the economy and the stock market, according to billionaire investor Jones.
He said Monday that the tool had completely shifted his outlook on both inflation and equities – and he’s now bracing for an AI-fueled “productivity boom” that drags down soaring prices and pushes up stock valuations.
“The introduction of large language models [and] artificial intelligence is going to create a productivity boom that we’ve only seen a few times in the last 75 years,” Jones told CNBC.
5. Morgan Stanley
It’s not just individual investors who are caught up in the AI fanfare.
In a research note last month, Morgan Stanley said that 2023 would be a breakthrough year for the technology, which it believes represents a $6 trillion investment opportunity.
“We see AI accelerating digital transformation and tech diffusion across the economy,” internet analyst Brian Nowak said in the note.
6. David Tepper
Like Ackman and Druckenmiller, the owner of the NFL’s Carolina Panthers made some big bets on AI over the past quarter.
Tepper’s family office Appaloosa Management bought 150,000 Nvidia shares worth around $42 million and 500,000 shares in Cathie Wood’s ARK Innovation ETF, which specializes in investing in disruptive tech.
Wood’s fund plunged last year but is up just under 24% in 2023 thanks to tech stocks’ massive rebound.
7. Cathie Wood
The Ark Invest CIO has never been one to miss out on a disruptive technological trend – and she’s been heralding AI’s potential long before ChatGPT’s explosion in popularity earlier this year.
