Investor Dan Niles expects there’s a good “melt up rally” investors can benefit from before the true artificial intelligence winners emerge, as more observers on Wall Street compare the current market to the dot-com bubble in 2000. “They’re all trying to spend a lot on this AI. It’s going to coalesce down to a few sets of players, and the rest are going to get absolutely wrecked,” the founder of Niles Investment Management told CNBC’s “Squawk on the Street.” “But it doesn’t mean you can’t have a really nice melt up rally that you can benefit from,” Niles continued. .IXIC 5Y mountain Nasdaq Composite, over five years The investor makes his comments as concern grows on Wall Street that the current market is starting to appear much like it did in 1999 and 2000, when the market had run up around enthusiasm around internet companies before the bursting of the dot-com bubble wiped out billions of dollars in wealth. Most recently, OpenAI CEO Sam Altman said he thinks the AI market is in a bubble , according to a report from The Verge published Friday. Still, Niles expects investors can net some gains before any crash. He noted that the Nasdaq Composite surged 86% in 1999, before suffering a “punishing” two and a half year decline. The tech-heavy index tumbled roughly 39% in 2000, 21% in 2001, and 32% in 2002. The investor expects this is the moment for investors to pick their positions in companies that are more likely to make a return on AI investment, noting Microsoft and Oracle as two examples he thinks are likely to do so. He said that he has shorts on other companies that he expects will get hurt in a downturn. “You’re seeing valuations, obviously, for some companies out there that just make absolutely no sense over the long term,” Niles said.
