AI Stock Euphoria: Is this to make another 2000 dot-com bust?

If you were investing in the late 1990s, you will remember enthusiasm Dot-com boomAt the end of its name, anything can raise millions in capital with a “.com” and can see its stock value double or triple overnight.

Investors believed that the Internet would change everything – which, to be fair, finally did it. But between 2000 and 2002, the dream turned into a nightmare when Nasdaq lost about 80% of its value, erasing trillions of dollars in money.

Today, with artificial intelligence The leading is in the headlines and the investor promotes enthusiasm, many people are wondering if we are going to experience another dot-com bust?

Equality in the end of the 90s

There are some undisputed similarities between the two periods. Subsequently, internet companies were given importance at astronomical levels with a business plan and a little more than a website. Today, AI feels like a new internet – a transformative technique that promises to increase industries ranging from healthcare to finance. The story is powerful, and is running in capital.

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Another similarity is market concentration. In 1999, posters of Cisco, Intel, Sun Microsystams and AOL Boom were children. Fast for today, and the so-called “luxurious 7”-Seb, MicrosoftThe alphabet, Amazon, Meta, Tesla and Nvidia – make more than 30% of the entire S&P500.

In that perspective, the S&P 500 is considered a diverse index of the US top companies. But if only a handful of stocks are running most of the returns, then the real risk arises when those companies stumble. The market capitalization of the top 10 S&P 500 shares is about 40% of the entire S&P 500 index.

Difference that matters

While the echo of the Dot-Com-Com era is loud, the differences are even more loud.

First, the evaluation is extended, but is not absurd as around 1999. Subsequently, the forward price of S&P 500 was more than 25-a eye-papping figure for more than 25-the ratio. There were no earnings in many internet shares, which makes the traditional assessment metrics meaningless.

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Today, the forward P/E ratio of S&P 500 is around 21. It is higher than a long-term average of 15–16, but the dot-com region has nowhere. And significantly, technical giants dominating today’s index are highly profitable businesses that produce heavy cash flows. The only area where we see these dot-com patterns popping up are in AI stock. Slap two letters AI next to a stock and it is a feeding frenzy for investors.

Second, companies leading charge are not speculative startups with unproven business models. AppleMicrosoft and Alphabet are trillion-dollars companies, with fort balance sheets and decades of frequent profitability. NVIDIA – AI Business Crown Jewel – Sells real products with extraordinary demands. Unlike Pets.com, Webvan.com and ETOYS (unlike them?), These firms have permanent revenue currents and sustainable competitive benefits.

Is AI a new dot-com?

There is no doubt that AI feels that he feels quarreling. As in the late 1990s, investors believed that every business would be replaced by the Internet, many now believe that the AI ​​would reopen every corner of the economy. Some of this optimism are appropriate.

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The Internet today changed the way we live our lives. AI has the ability to increase productivity, reduce costs and create a completely new industries. But in the short term, markets almost always reduce adoption speed and AI companies begin so fast that many are bound to fail.

This is where the risk lies: it is not that the AI ​​will change the world, but how quickly Investors feel that it will happenHistory tells us that transformational technologies often undergo propaganda cycles. We have thought so far, people are still not writing checks, but still 50% of Americans have written at least one check in the last 12 months. Will be the winner, but there will be a lot of loses on the way.

Why is it not 2000

Despite the publicity, I do not believe that we are leading to repeat the dot-com crash. here’s why:

• Earning power: The largest companies in S&P 500 are cash-generating machines. Apple alone makes more than $ 100 billion in annual free cash flow. It is far from the cash-burning dot-comments of the past.
• Strong balance sheet: Corporate America is healthy today. Many major firms have low loans and large -scale cash reserves. In 2000, the balance sheet was very weak.
• Regulation and Maturity: The financial system is more ready. The dot-com bust and lessons from the 2008 crisis have shaped more cautious capital markets.

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What instability will be? Absolutely. Some? AI -run stock There is a price for perfection and when reality is reduced by expectations, it will be correct. But a wholesale collapse of the market such as we saw from 2000 to 2002, is unlikely.

Better comparison may be a bounce of the 1800s. Railroad changed the economy, and many companies failed in the way. But the infrastructure conducted America’s development for more than a century. AI can follow the same path-Dirty in the years, but eventually world-ups.

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