When market observers liken the current stock market to the rally of the late ’90s, it’s often a call for caution. Bubble juxtapositions abound as the dot-com and AI bull runs are analyzed.
But Julian Emanuel, chief equity and quantitative strategist at Evercore ISI, is much more positive on the correlation.
In a new note published Sunday, Emanuel and team described a “technological revolution lifting stocks, multiples and society to new highs.”
It’s a structural tech-driven bull market that’s been interrupted by a non-recession bear market which has regained all-time highs very quickly, driven also by the Federal Reserve cutting interest rates.
However, that was the internet revolution that formed into the turn of the millennium. “And it’s also the the AI revolution bull market of today,” Emanuel said.
In other words, investors have been offered a “twice in a lifetime” technological revolution to exploit, and Evercore reckons this means a rally that lasts though 2026 and carries the S&P 500 SPX markedly higher.
Why is Emanuel so positive about the market’s current AI excitement — especially given the dramatic fall for equities after the internet bubble burst in early 2000?
“AI is ‘bigger’ than the internet [in just 3 years]…its effect has touched all parts of society and industry even as adoption only begins to inflect, while the equity market has seen broad rally participation in 2022-’25 in contrast to the dot-com era, which saw negative market breadth for two years prior to the peak,” he said.
Indeed, he noted that in contrast to the late 1990s, utilities that are best suited as conduits to supply energy to AI data centers and associated enterprises, alongside industrials, which are the facilitators of the global AI buildout, have participated in the 2025 bull market with tech.
Emanuel acknowledged that some investors are wary that the majority of the AI-driven bull-market gains have already been seen in this cycle. “We disagree, and thus introduce a year-end 2026 price target for the S&P 500 of 7,750, [on a] 27 times earnings per share estimate [of] $287 for 2026.”
That is evidently a high multiple by historic standards, but Emanuel noted that the previous technological revolution market in 2000 saw the S&P 500 trade on 28 times EPS.
Furthermore, just like during the dot-com revolution, the AI revolution is going to have an accommodating Federal Reserve to provide support. “The critical difference being that in 2025-’26 a Fed that is increasingly carrying President Trump’s imprimatur is not going to hike rates at any time before the 2026 midterm elections, regardless of the ‘economic brew,’” said Emanuel.
In fact, if the Fed were to overstimulate the economy, then Evercore does see the risk of a bubble forming that could cause the S&P 500 to surge to 9,000 in 2026, as a multiple of 30 is applied to earnings of $300.
To be clear, Emanuel and team still think the market is due for a pullback in the near term. He has a 2025 year-end price target for the S&P 500 of 6,250 (though he has just increased it from 5,600) because he believes “scares are a part of innovation-driven bull markets as their narratives are stress tested in real time.”
The currently low Cboe Volatility index VIX means downside protection is cheap and put options are attractive as a hedge against such a short-term reversal for stocks.
But if that was to occur then investors should buy the dips, reckons Emanuel.
“[B]efore a bubble expands and ultimately bursts, this bull market has a period of ‘rational exuberance’ ahead of it, marked by the type of robust capital markets activity that has accompanied every major structural bull market of the last 25 years in late stages, 2021, 2007, 2000 — but not yet this one,” he said. “This is still ahead.”