AI Boom or Bubble? What the Dot-Com Era Teaches Us About Today’s Market
History doesn’t repeat—but as Mark Twain famously noted, it often rhymes.
With the AI stock bubble vs dot-com bubble debate heating up, investors are drawing parallels between today’s tech-driven rally and the speculative excess of the late 1990s. The Nasdaq Composite has surged ahead of the S&P 500 again in 2025, fueled by hopes for artificial intelligence breakthroughs. But the ghosts of the dot-com crash are never far from memory.
So—is this time really different?
Valuations vs. Reality
Back in the dot-com era, it was easy to get swept up in the hype. Hundreds of internet-related IPOs flooded the market in 1999, often with little more than a name and a domain. By comparison, 2025 has seen fewer than 20 generative AI-related IPOs. That scarcity, some argue, reflects more disciplined capital allocation and a genuine focus on profitability.
But the warning signs are still there.
Apollo Global’s chief economist Torsten Sløk warns that today’s top 10 S&P 500 stocks are trading at higher valuations than their 1990s counterparts. At nearly 30 times forward earnings, these giants are priced for perfection. In the early 2000s, those same top-tier names peaked closer to 25 times earnings—just before the crash.
Is This a Bubble?
Not everyone is convinced we’re in bubble territory.
Nicholas Colas of DataTrek Research points to advancements in technology as a key difference. “Computing power has increased 380,000% since 1999,” he notes, suggesting today’s valuations are supported by real productivity gains, not just hype.
Others, like Manish Kabra at Société Générale, argue that it’s not the level of interest rates that matters most, but the direction. With the Fed holding steady and inflation cooling, the conditions that led to a blow-off top in 2000 just aren’t present now. Kabra estimates the S&P 500 would need to rise another 20%—to around 7,500—before valuations enter true bubble territory.
Technical Clues from the Charts
While the broader trend remains bullish, technical signals hint at possible near-term turbulence.
Last week’s S&P 500 chart delivered a rare doji candle, often seen at market turning points. Combine that with a sharp V-shaped breakout above 6100—a pattern with a higher historical failure rate—and the index may be due for a test of the key 6000 level.
In the bond market, the iShares 20+ Year Treasury Bond ETF (TLT) is holding precariously at the $85 level. The formation of a bear flag suggests a break lower could bring a quick move to $82, pressuring equities as yields rise.
Gold’s Quiet Warning?
Gold’s been rallying while few are watching. Since April, it’s traded in a tight range between $3,200 and $3,400. A decisive breakout above resistance could send it to $3,800, hinting at deeper market anxieties.
Ironically, gold—once called “dead money” by critics—is behaving like the smartest asset in the room. Its orderly uptrend and rising sentiment may be a clue that institutional investors are quietly hedging against something bigger.
Final Thought: The Rhymes of Risk
Yes, there are meaningful differences between 2000 and 2025. The Fed isn’t tightening, tech isn’t as frothy, and fewer AI companies are going public. But investor psychology doesn’t change much.
Whether it’s dot-coms or AI, the key lesson is timeless: fundamentals matter, and rallies never last forever.
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