The stock market rally could last another 5 years, but it will end in a “spectacular bubble burst,” says veteran tech investor Gene Munster

There is a 3-5 year bull market brewing in technology stocks, according to Gene MunsterBrian Ach/Getty Images

• The current stock market rally could last another 5 years, according to technology analyst Gene Munster.

• Munster said a new crop of AI companies will go public and drive a stock market boom.

• But Munster expects the stock market rally to turn into a bubble that will eventually burst.

The stock market rally is expected to continue rising for the next three to five years before ending in a spectacular bubble it finally happens, according to veteran technology analyst and managing partner at Deepwater Asset Management, Gene Munster.

Munster doesn’t make this prediction lightly, as he still has painful memories of being a technology analyst during the dot-com boom and bust of the 1990s, but he sees potential for big upside and eventual downside in stocks driven by the growing adoption of AI technologies.

“We are in the early stages of what is a three- to five-year bull market, and that may seem out of reach given the market run we’ve had more recently… but if you believe in the substance of AI is greater than the hype , so the market will continue,” Munster told CNBC on Friday.

Munster said broader technology trading should continue to drive the stock market, but that investors should not rely solely on mega-cap technology stocks to drive the bulk of the gains. Instead, much of the advantage Gene sees inflating the stock market bubble will come from smaller AI-focused companies.

“The substance of the bubble will come from a different class of technology companies that will drive this further. I think part of this will be an IPO class of AI-first companies,” Munster said.

Meanwhile, technology stocks Magnificent 7 should “remain generally well positioned, they will benefit, but that’s not where you’re going to get that kind of 2x to 3x upside,” Munster said.

Munster’s optimism is based on the idea that AI technologies will have twice the impact that the Internet has had.

“The concept of a machine capable of general intelligence to me is a factor 2x greater than the internet,” Munster said. “I think that will come from some smaller mid-cap companies and some IPOs that will ultimately be the next Mag 7, call it five years from now.”

And as Munster sees the stock market recover turning into a bubble which comes to a painful end at the end of the decade, that doesn’t mean investors should avoid owning shares.

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“This will end in a spectacular bubble burst, but I think a lot of wealth creation could happen between now and then,” Munster said.

Munster also highlighted Alphabet It is Metaplatforms as unique and flagship holdings in Deepwater Asset Management’s technology-focused portfolio thanks to its in-house construction AI technologies.

“These two companies are unique because the future of AI does not depend on someone else,” said Munster. “If you go to Microsoft, Apple, look at what Amazon is doing. They all require third-party models to really power what they’re doing.”

“So when I think about really defining who some of the biggest winners will be in AI specifically, I think it comes down to Meta and Google.”

Read the original article at Business Insider

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