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Roaring 20s....Again!

About 2 years back coming out of COVID pandemic, I wrote blog titled "New Roarin' 20s.." It covered what happened in 1920s and what are the factors now which would trigger new roaring 20s. Do check out the blog...almost all factors are valid even now. 2022 went sideways due to inflation pressures which triggered historical steep rate hikes by central banks which led to tech companies taking more measured approach and laying off 200,000 employees....all of that changed in Nov'22 when ChatGPT was launched...even though I had mentioned AI/ML as one of the factor in my previous blog, ChatGPT really captured the imagination of the world and changed the outlook of AI instantly similar to what Netscape did with the Internet and iPhone did with the mobile. The singular concept of "Language is the Interface" made AI accessible instantly to billions of normal people....And now without mentioning AI, no talk starts or ends in tech world..and despite onsite of most-awaited-but-not-yet-here recession and inflation/interest rates duel, market mania is back to almost same level as late 90s...

Nvidia published results in mid-May and gave guidance which was nearly 50% higher than analysts were predicting ($11B vs expectations of $7.2B) - all due to surging AI driven demand to its chips...overnight it became the most important company in the new AI world...no wonder markets pushed it's valuation over trillion $ (7th company in the world to reach this milestone). Late 90s Internet driven demand drove valuations of many companies to similar stratosphere (500Billion in 2000 is more than trillion now)....and then dot.com bubble busted...even though internet and technologies invented during those times changed the world forever....Couple of today's trillion $ companies were born during those times (Amazon and Google).

So what happens now...are we in time-period similar to 1996 when Fed chairman Greenspan made his famous "Irrational Exuberance" comment about markets when dot.com mania was in early stages. Similarities of those times are eery...

  • Interest rates and mortgage rates were high (similar to today's rates)
  • Collapse of LTCM in 1998 was similar to bust of SVB and couple of other regional banks
  • Optical/Networking companies were like AI/Cloud companies - doubling every year (I joined one of such company that time)
  • Democrat president was in White House...only difference was that President Clinton was able to manage finances to create Budget Surplus. And now President Biden is signing the debt-deal to raise debt-limit to $35 trillion....(yes that's Trillions)
Can AI momentum continue to benefit all of tech eco-system and eventually world and mankind? The short answer is YES...eventually. It will have its own journey where both good and bad outcomes would come out. Hopefully more good will come out than bad preferably by multiple factors (I wish the ratio is 99.9999 good and .0001 bad)

The hypothesis mentioned at start of year in "Tech in Vogue again.." is playing out exactly the way I predicted...And the stocks in TAMANNA are up significantly...NVDA and META up over 100%


We are in early phase of this AI driven momentum..circa mid-1990s...It's feels like we are in 2nd innings of baseball game...So despite worries of most-awaited recession, inflation, interest rate hikes, tech layoffs, mini banking crisis, upcoming blow-up of commercial real estate....markets would do ok and in fact they may reach all time high (S&P crossing 4800) in next 18-24 months...Nasdaq may reach all time high even before that....so my advice would be stay with ETF/index funds (SPY, XLK, QQQ, SMH) to ride the upswing but avoid chasing individual stocks unless you know what you are doing and willing to tolerate the volatility...

Couple of interesting quotes to wrap up the blog..

“History Doesn't Repeat Itself, but It Often Rhymes” – Mark Twain.


"Software is Eating the World...AI will Eat the Software and Change the World"

/Shyam

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