Tudor Jones stated that the current AI bull market is analogous to the early stages of internet commercialization in 1995, with the process now reaching 50% to 60% completion, and is expected to continue for another one to two years. He revealed that he has recently increased his holdings of AI assets through a ‘basket’ approach, but also cautioned that if the ratio of stock market capitalization to GDP rises further, it may eventually face a ‘suffocating’ major correction. Regarding Fed policy, he believes that the new chairman, Wash, will not only refrain from cutting interest rates but may even consider raising them.
Paul Tudor Jones, a legendary figure in the hedge fund industry, stated that the AI-driven bull market in the stock market has not yet reached its end. He recently increased his holdings in related stocks and is drawing historical parallels from the technology boom cycles of several decades ago.
Jones said on a media program on Thursday that the current stage of AI development bears a striking resemblance to the period of accelerated commercialization of the internet in 1995. He estimates that the current AI bull market has completed about 50% to 60% of its journey and “can last another one to two years.” He likened the current market sentiment to that of 1999 — roughly a year before the peak of the dot-com bubble in early 2000.
Jones also issued a warning: if the stock market rises by another 40% from its current level, the ratio of the total market capitalization of U.S. stocks to GDP could climb to between 300% and 350%, at which point “there will inevitably be some kind of suffocating major correction.” While he remains optimistic about the future market, he does not shy away from acknowledging the downside risks when the bull market eventually ends.
Regarding the Federal Reserve’s policy, Jones believes that the new chairman, Warsh, will not only refrain from cutting interest rates but may even need to consider raising them. This is because the Federal Open Market Committee (FOMC) is currently at a stage with the most dissenting voices in nearly 34 years, while inflation remains above the policy target.
Jones, the founder and Chief Investment Officer of Tudor Investment, gained fame for accurately predicting and profiting from the 1987 stock market crash. His latest comments provide an endorsement from a market veteran for the ongoing AI trading logic, which is still in flux, and offer investors a reference for redefining the timeline of the AI-driven market cycle.
Drawing Parallels Between Microsoft and the Internet: The Productivity Miracle Is Still Midway
Jones compared the recent breakthroughs in AI to two historical milestones: the first being Microsoft’s early dominance in the software field during the 1980s; the second being the wave of internet commercialization in the mid-1990s, especially the acceleration of internet applications after the release of Windows 95 in 1995. He believes that both technological revolutions initiated four to five-and-a-half-year cycles of productivity leaps and market upswings.
“I think Claude this January is equivalent to the moment Microsoft emerged in 1981,” Jones said. He regards the Claude large model released by Anthropic earlier this year as a landmark node in the ongoing AI revolution.
“Both periods marked the beginning of productivity miracles, each lasting four to five-and-a-half years,” he said. “We are probably about 50% to 60% through the current cycle. If I had to choose a reference period, I believe it can go on for another one to two years.”
Signs of the Late Bull Market Are Already Visible; Correction Could Be ‘Suffocating’
Despite his optimistic outlook on the market, Jones remains highly vigilant about the downside risks when the bull market comes to an end. He pointed out that in terms of overall market trends, the current sentiment still resembles 1999 — rather than the peak of the dot-com bubble in 2000. This judgment implies that while there may still be room for further upside in the market, the top is not far off.
“Imagine if the stock market rises another 40%, the ratio of stock market capitalization to GDP would be approximately 300% to 350%,” said Jones.
“At that point, there will inevitably be some kind of… dramatic correction that takes one’s breath away.”
Over the past few years, driven by expectations that AI will transform various industries and significantly boost productivity, U.S. stocks have continued to rise, led by chip manufacturers, cloud computing firms, and generative AI developers, with the S&P 500 repeatedly hitting record highs.
Increased exposure to AI-related assets using a ‘basket’ approach.
Jones stated that he has recently increased his investments in AI-related assets but did not disclose specific purchase timing or target stocks. He emphasized that as a macro trader, his usual practice is to buy a basket of related assets rather than betting on individual stocks.
“I am a macro trader, so I just buy baskets,” he said. “All I want to say is that this is a wild, wild era… I always like to look for historical precedents.”
Against the backdrop of AI still being in its early stages of development, Jones’s statement both confirms the logic of the current bull market and implies concerns about overheated valuations—a stance that combines optimism with caution, perhaps reflecting the mindset of many institutional investors at present.
Warsh Taking Office as Fed Chair Renders Rate Cuts ‘Impossible’
Jones made it clear that Warsh, who is about to take over the Federal Reserve, will not pursue a rate-cutting path. Against the backdrop of persistently higher-than-target inflation, a rate hike is instead more likely. The market generally expects no action for now.
Jones bluntly stated, “Will he cut interest rates? Impossible.” He also emphasized that Warsh will face numerous constraints before the general election.
Although Warsh himself does not hide his acknowledgment of the rate-cutting path, he is about to face a Federal Open Market Committee (FOMC) with internal divisions reaching their highest level in nearly 34 years. Several regional Fed presidents have already objected to the wording in the policy statement hinting at further rate cuts.
The current macroeconomic backdrop also does not favor rate cuts. Jones pointed out that the conflict between the US and Iran, along with Trump’s tariff policies, continues to push inflation above the Federal Reserve’s 2% target. Meanwhile, the labor market has stabilized, further reducing the necessity for easing policies.
The Federal Reserve’s current target range for the federal funds rate remains at 3.5% to 3.75%, unchanged since December of last year. According to the CME Group’s FedWatch tool, traders currently expect the Federal Reserve to keep interest rates unchanged throughout the year, with probabilities of rate cuts and hikes being roughly equal and both at relatively low levels.
Editor/Stephen