Price Fireworks in the Markets: Tech Sector in Euphoria

The stock markets are showing impressive performance this year. The S&P 500 has increased by 27%, nearly three times its average annual growth since its inception in 1957. The technology sector is particularly driving prices upward, especially companies focusing on the revolution of Artificial Intelligence (AI). A prime example of this trend is the shares of Duolingo and Lemonade, which increased by 50% and 150% respectively in 2024. These companies could carry their momentum into 2025 as well. Duolingo, the world's largest digital language learning platform, pursues a mobile approach to make interactive, playful lessons accessible to anyone with a smartphone. In the third quarter, the platform had 113.1 million monthly active users, a 36% increase compared to the previous year. Even more impressive is the growth of paying users, which increased by 47% to 8.6 million. These subscribers benefit from additional features that accelerate learning – and this is where AI comes into play. Earlier this year, Duolingo introduced a new subscription called Max, which is more expensive due to two AI features: Roleplay, which offers a chatbot interface for conversational exercises, and Explain My Answer, which provides individual feedback based on user errors. In September, Duolingo expanded the AI offering with Video Call, which allows users to have a video conversation with a digital avatar at any time to intensify language practice. Duolingo's long-term goal is to provide a learning experience that can compete with a human tutor. The Max plan is currently available to only about half of the global users, but the rollout will continue next year. In the third quarter, Duolingo achieved total revenue of $192.6 million, a 40% increase compared to the same period last year. These strong results enabled the company to raise revenue forecasts for 2024 for the third time, now expecting up to $744 million. Although Duolingo's stock is currently highly valued, with a price-to-sales ratio of 23.5 – significantly above its average of 15.1 since the IPO in 2021 – revenue is growing so rapidly that the stock might soon not seem expensive.