supercharged by excitement over artificial intelligence is drawing comparisons with the dot-com bubble two decades ago, raising the question of whether prices have again been inflated by optimism over a revolutionary technology.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.
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. While several internet stocks such as Amazon.com survived and eventually thrived, others never recovered.“No one exactly knows what will happen with AI,” said Sameer Samana, senior global market strategist at the Wells Fargo Investment Institute, noting the same uncertainty about the eventual long-term winners.
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 dot-com boom. More broadly, the S&P 500’s price-to-earnings ratio of 21x is well above its historical average but below the roughly 25x level reached in 1999 and 2000, according to Datastream.