NEW YORK - A U.S. stock rally supercharged by excitement over artificial intelligence is drawing comparisons with the dotcom bubble two decades ago, raising the question of whether prices have again been inflated by optimism over a revolutionary technology.
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.
The difference is clear in the valuations of Nvidia and Cisco, a key provider of products supporting internet infrastructure, whose stock has yet to rescale its peaks of the dotcom boom. More broadly, the S&P 500's price-to-earnings ratio of 21 is well above its historical average but below the roughly 25 level reached in 1999 and 2000, according to Datastream.