AI Boom: Alger Funds CEO Dan Chung Sees Growth Ahead

UPDATE: Alger Funds CEO Dan Chung has just announced that the current AI boom is not a bubble, but a legitimate growth opportunity. In a recent interview, Chung emphasized that stocks related to artificial intelligence (AI) are poised for continued momentum, unlike the volatile dot-com bubble of the late 1990s.

Chung, who has extensive experience from his time as a senior tech analyst during the dot-com era, stated that AI stocks have shown strong performance without the same irrational exuberance seen in 1999. He pointed out that his firm, which manages $33 billion in assets, is witnessing a significant upswing, with the Alger 35 ETF up 51.83% in the past year.

“The fastest growers associated with AI have had tremendous momentum in the last nine months, and we’re still in the middle stages of this boom,” Chung stated. He cautioned investors not to miss the second half of this growth phase, which he believes could mirror the explosive rise experienced during the late 1990s.

Chung’s Insights: Chung analyzed four critical factors to determine the sustainability of the AI boom: market behavior, company fundamentals, valuation, and macroeconomic conditions. He highlighted that leading AI companies today are fundamentally stronger than their dot-com predecessors. For example, Microsoft, a major player now, traded at 67-70 times earnings during the previous bubble but is currently valued at just 1.5 times the S&P 500.

In stark contrast to the dot-com era, Chung noted that today’s AI leaders, such as Nvidia, Microsoft, and Amazon, have robust revenue growth and free cash flow. Nvidia, for instance, is projected to grow nearly 50% in revenue this year, with earnings increasing by 65% and free cash flow by 67%.

Future Outlook: Chung is optimistic about the AI market’s potential, estimating that it could reach $2 trillion-$3 trillion in 2030-2031. He believes that while there are risks, the future growth prospects for AI technologies are substantial, especially as they continue to permeate various industries.

Amid these insights, Chung advised investors to consider stocks like Nvidia and Nebius, a leading AI data center company that is set to grow exponentially over the next decade. Nebius has already announced major deals with hyperscalers and is expected to achieve over $2.5 billion in revenue by 2026.

With the landscape rapidly evolving, Chung urges investors to stay informed and engaged. The AI boom presents a unique opportunity, and those who act now may reap substantial rewards in the coming years.

As the AI sector continues to develop, investors and industry watchers should keep a close eye on Chung’s predictions and the performance of leading companies in this space. The urgency is clear: the future of AI is unfolding right now, and it could redefine the market landscape in unprecedented ways.