...in every technological revolution, stocks that lead the revolutionary/transformation change have front-run the potential that it offers. In other words, the leading stocks made quantum leap in their share prices well ahead before their full potential is realised and well before the delivery of the age of revolution.
Age of the Internet
Cisco was the poster child of the age of the Internet, saw its stock gains leaps and bounds and spearheaded the dot.com boom and later bust.
When the stock busted along with the dot.com era, it wasn't the case that Internet suddenly became irrelevant or stopped growing. In fact internet as we know it became the mainstay and an integral part of our society- it became even more relevant but Cisco never scaled back up to its peak again.
It was because as time progressed, there was more competition and for mass adoption, it had to become cheaper as supply expanded and the monopoly was over for Cisco.
Age of the Solar Energy
2007-08 saw the advent of the solar energy via solar panels, and solar panel companies became the rage of the period. First Solar's stock rose significantly just as Cisco did at the early innings of the revolution. But the exuberance died down as the industry soon became saturated with more solar panel manufacturers with equally advanced technology. FSLR never did recover back to its 2008 peak, but solar energy panel is widely used/adopted globally today.
Age of the Electric Vehicle
And just like Cisco and First Solar examples, Tesla has been the poster child for the Electric Vehicle (EV) revolution. More than a decade later, EV has finally becoming the new normal in consumer transportation. It has more to grow, that is without doubt. But since mid 2023, the EV landscape has become significantly competitive, with industry price cutting becoming the norm and the birth of many EV makers especially in China. Looking in retrospect in TSLA stock chart, we could say with some confidence that end 2021 was the peak in Tesla's valuation and that all EV stocks have fallen in tandem. Similar to Cisco and FSLR, EV stocks have front-run their potential and that the EV stock boom has possible ended and never to be revisited. Because the landscape has similarly changed to herald new competition and supply as the industry starts to mature.
And because lithium's prospect is substantially beholden to the EV fortune, we see a similarity in the lithium industry which has now entered a period of consolidation; with new supplies coming onstream in the years ahead, EV consolidation, new battery technologies in progression and EV growth substantially reliant on EV maker's capability to produce and sell their EVs at a competitive price (equivalent to ICE) for mass adoption, therefore needing battery and battery minerals including lithium to stay reasonably and sustainably cheap, the days of US$7000-8000 Spodumene prices are over. Which also likely mean lithium stocks will struggle to return to their former peak prices.
The Age of Artificial Intelligence (AI)
...now we come to NVIDIA which could be in the mid innings of its stock valuation, but just like all the tech revolutions before it, we ought to map the prior lessons and conclude that NVIDIA and all the AI stocks are also now front-running their potential. It won't be long before the Chinese and/or more American companies are able to match NVIDIA, new supply will soon crowd-out the leader's (NVIDIA) first mover advantage.
..so AI stocks valuation would run supreme well before their delivery and well before the world even truly understand the magnitude of value added that the AI revolution would actually deliver. It may also disappoint current lofty expectations or their delivery and hence potential could be delayed by operational and regulatory hurdles that the market failed to sufficiently impute.
..What I am showing you is that for every bubble and revolution, the stocks that front run their eventual potential due to first mover advantages would eventually succumb to new competition and supply and new technology that would eventually diminish their stock price/valuation. And their peaks never again revisited.
..so just because we recognise that the future of EV (and by association lithium) and AI is bright ahead, we ought not to jump to the conclusion that those EV (and by association lithium) and AI stocks would be similarly bright well into the future. Instead, evidence points that as they become more accessible for mass adoption, the monopoly over pricing would diminish significantly and the super normal profits that underpin their early supreme valuation would also have ended, and along with it, their historically high stock prices.
