AI fever, coupled with a resilient economy and stronger earnings, has lifted the S P 500 index to fresh records this year following a run of more than 50% from its October 2022 low. The tech-heavy Nasdaq Composite index has gained over 70% since the end of 2022.
While various metrics show stock valuations and investor exuberance have yet to hit peaks reached at the turn of the century, the similarities are easy to spot. A small group of massive tech stocks including AI chip maker Nvidia symbolise todays market, recalling the Four Horsemen of the late 1990s: Cisco, Dell, Microsoft and Intel.
The dizzying run in shares of Nvidia, which gained nearly 4 300% in a recent five-year period, stirred memories of how network equipment maker Cisco surged about 4 500% over five years leading up to its peak in 2000, according to a BTIG comparison of the two stocks.
Valuations have grown as well, though many tech champions appear to be in far better financial shape than their dot-com counterparts of the late 1990s and early 2000s. Other measures, such as investor bullishness, have yet to reach the frothy heights of the turn of the century.
The concern is that the AI-driven surge will end the same way as the dot-com boom with an epic crash. After nearly quadrupling in just over three years, the Nasdaq Composite plunged almost 80% from its March 2000 peak to October 2002. The S P 500, which doubled in a similar timeframe, collapsed nearly 50% in that period.
