For more than three decades, investors have typically had a game-changing innovation or next-big-thing technology to captivate their attention and wallet. Perhaps the best example is the advent and proliferation of the internet in the mid-1990s, which sent the benchmark S&P 500 (SNPINDEX: ^GSPC), iconic Dow Jones Industrial Average (DJINDICES: ^DJI), and growth-focused Nasdaq Composite (NASDAQINDEX: ^IXIC) soaring.
The internet paved the way for businesses to move beyond their traditional storefronts. It also revolutionized investing and broke down information barriers that had previously existed between Wall Street and Main Street. Having instant access to income statements, balance sheets, management commentary, and corporate presentations made investors more willing to accept valuation premiums for internet-driven businesses that promised jaw-dropping growth rates.
However, the internet revolution wasn’t without its speed bumps. As history has consistently shown, every new technology or trend has needed time to mature. In simpler terms, it takes time for businesses to figure out how to optimize new technologies. This leaves the stock market and the companies on the leading edge of these trends susceptible to bubble-bursting events, such as the bursting of the dot-com bubble in the early 2000s.
Other next-big-thing technologies and trends followed suit, with genome decoding, nanotechnology, 3D printing, blockchain technology, and the metaverse representing examples of eventual bubble-bursting events.
Typically, game-changing innovations and trends are singular events, with one hyped innovation or trend existing at a time. But we may be witnessing history, with three potential bubbles brewing at the same time.
Bubble No. 1: Artificial intelligence
Arguably, no technological innovation since the internet has excited Wall Street and investors quite like the evolution of artificial intelligence (AI). Based on estimates from PwC analysts in Sizing the Prize, a combination of productivity improvements and consumption-side effects derived from AI can add $15.7 trillion to global gross domestic product by 2030.
