The Nasdaq’s best first half in 40 years can be boiled down to two words: artificial intelligence (AI).

AI-linked tech stocks have helped power the Nasdaq to a 32% gain over the first six months of 2023. This is the index’s best performance since 1983.

And if it wasn’t for booming share prices in AI stocks, markets have pretty much gone nowhere this year.

That’s because AI-related stocks are accounting for nearly all the S&P 500’s gain this year. Exclude them, and the index is only up slightly.

But the boom times could be over for AI stocks. That’s because stock price gains are pushing valuations into the stratosphere. Just take Nvidia (NVDA), for example.

The company’s semiconductors are in high demand for the kind of computing power needed to train and evolve AI algorithms.

And while Nvidia is sure to reap the benefits of AI-driven demand, the stock has tripled this year. It brought the company’s price-to-earnings (P/E) ratio to 232. To put that figure into perspective, the S&P 500’s P/E is 22.

Now, the risk is that those share prices will collapse under the weight of their own lofty valuations.

There’s plenty of precedent that the run-up won’t last, while one indicator warns it could be time to get out of the tech sector…

Hype, Boom, and Bust

Hyped technologies come and go… bringing along a boom-and-bust cycle in share prices.

The most famous precedent took place during the late 1990s. The advent of the internet age drove a frenzy in stock prices.

Between 1999 and early 2000, the Nasdaq rocketed 130% higher on the back of failed internet stocks like

But those gains quickly vanished. From the 2000 peak through October 2002, the Nasdaq collapsed by 78%. It took nearly 15 years for the index to fully recover.

There’s an even more recent example. Just three years ago, a speculative frenzy overcame tech companies promising to revolutionize everything from television to payments and medicine.

The Ark Innovation ETF (ARKK) became the poster child for the move. Its share price jumped 351% in less than a year, but then it proceeded to collapse by 81%. Even this year’s 63% rally has barely dented the decline.

And now, warning signs are piling up that the latest tech boom could soon be facing a bust.

Crowded and Expensive

Tech stocks won’t fall just because valuations are high. After all, excessive valuations are a symptom of a bubble, not the cause.

The cause is panicked buying from investors who fear missing out. As long as there is a dry powder for additional purchases, prices can still push higher.

But investors are piling into technology stocks at a rate we haven’t seen in nearly four years. That’s based on money flows into the popular Nasdaq 100 ETF (QQQ). In a recent two-week stretch, just $4.8 billion flew into QQQ.

That shows investors are chasing the latest tech fad hand over fist. But that kind of buying spree can’t be sustained forever.

Even the smart money is growing wary. Bank of America’s Fund Manager Survey shows professional fund managers view big tech as the most crowded trade by a long shot.

And according to JPMorgan, the tech sector is the most overvalued sector relative to its 20-year average based on its P/E ratio. For example, its current P/E is 27.6 when compared to its 20-year average of 17.9.

That’s why you should think twice before chasing extended and overbought AI-linked stocks that have already seen big run-ups…

NVDA is one of them. Nosebleed valuations and a crowded trade present ripe conditions for a sell-off, especially once there’s no one left to buy.

In fact, the world’s most powerful investors are piling out of the tech sector right now. That’s because a rare, generation-defining event is about to hit the stock markets on September 20. It will send America’s most loved stocks, including tech stocks, plummeting down.

At the same time, it will push one corner of the market to all-time highs. And investors who position themselves early can reap seven-figure profits.

That’s why Inside Wall Street’s editor Nomi Prins is going live this Thursday, August 3 at 10 a.m. ET to reveal how you can prepare for what’s coming.

She’ll also give away the name and ticker of the top way to play this rare market event, all for free. Sign up for the event by clicking here.


Clint Brewer
Analyst, Rogue Economics

P.S. The last time Nomi used a market event like this to make a trade recommendation, she scored whopping returns of 1,313% and 2,174%.

Now, history is repeating itself. As we approach September 20, the financial elite, including billionaires like Elon Musk and Warren Buffet, are all pouring their money into one, little-known investment vehicle…

It’s already outperforming the S&P 500 by 4x… tech stocks by 5x… and Bitcoin by 3x.

To get in with the ultra-wealthy, make sure you attend Nomi’s presentation on Thursday. Click here if you haven’t registered for it yet.