As if the AI mania weren’t hot enough already…
On this past Wednesday, June 28, the world’s largest asset manager – BlackRock (BLK) – threw its full weight behind the AI trend. It called artificial intelligence a “mega force” that will be “a big driver of returns.”
BlackRock has about $10 trillion in assets under management. So, when BlackRock says something, the rest of the financial world listens.
BlackRock Goes All-In on AI
In its midyear report, BlackRock’s research arm said it is implementing an “overweight to AI as a mega force.” It believes that “new AI tools could analyze and unlock the value of the data gold mine some companies may be sitting on.”
In other words, BlackRock sees huge potential for AI to turn unused data at thousands of companies into usable cost- and time-saving actions. And that will inevitably boost corporate profits and stock prices.
Interestingly, this bullish call on AI stocks comes after they’ve already caught fire. The tech-heavy Nasdaq Composite index is up about 30% year-to-date and is on track for one of its best semi-annual performances ever.
Is BlackRock shooting behind the duck here? Has it missed the boat?
The AI megatrend is just getting started. ChatGPT really kickstarted this AI frenzy back in November 2022. We’re basically just seven months into the AI Boom. By comparison, the Internet Boom lasted almost 10 years – from the launch of the world’s first website in 1991 to the peak of the dot-com bubble in 2000.
Compared to other big booms like gold in the 1970s, housing in the 2000s, and cryptos in the 2010s, this AI Boom is still both relatively young and small. It has a lot of runway ahead of it.
So, no, BlackRock isn’t late. If anything, it’s still early because we’re in Year 1 of what will likely be a 10-year AI Boom.
The Price Action in Tech Stocks
A different way to look at this is through the lens of tech stock prices themselves.
The Nasdaq is up 30% year-to-date. That may seem like a huge run-up, and it is – but it pays to remember that tech stocks got crushed last year.
In other words, tech stocks are rebounding with vigor this year. They’re not soaring from already-elevated levels.
The difference is critical.
Historically speaking, whenever tech stocks have rocketed like this – up more than 20% in the first half of a year after dropping in the previous year – they were ALWAYS in the first few innings of a multi-year surge higher.
This exact price dynamic has happened five times before: in 2003, 1995, 1991, 1985, and 1975. In each of those years, the Nasdaq was up more than 20% through the first six months of the year after dropping in the previous year – the exact same situation we have today.
And in each of those years, tech stocks stayed hot for the next two years, posting average returns of nearly 90% over that stretch!
When we graph the current price action against its historical precedents, it becomes pretty clear that we are in the first few innings of a multi-year tech bull market.
The Final Word
BlackRock is the world’s largest money manager for a reason. It excels when it comes to money management.
And it’s throwing all its weight behind AI right now because it understands the reality – this AI Boom is just getting started.
And now is as good a time as any to go all-in with AI stocks.
We’ve compiled a portfolio of our favorite AI socks as part of a presentation in which we share a “backdoor” way to invest in the company that started this whole AI Revolution – OpenAI, the creators of ChatGPT.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.