AI Stocks Are Giving Investors Dot-Com Déjà Vu

Forbes

In 2000, internet darling Cisco was the world’s most valuable company. Today it's worth half as much. AI juggernauts like Nvidia and Palantir are driving the tech-bloated S&P 500 today. Buyer beware.Read the full story on Forbes: https://www.forbes.com/sites/hanktucker/2025/08/25/why-ai-stocks-are-giving-some-investors-dotcom-bubble-dj-vu/  Subscribe to FORBES: https://www.youtube.com/user/Forbes?sub_confirmation=1  Fuel your success with Forbes. Gain unlimited access to premium journalism, including breaking news, groundbreaking in-depth reported stories, daily digests and more. Plus, members get a front-row seat at members-only events with leading thinkers and doers, access to premium video that can help you get ahead, an ad-light experience, early access to select products including NFT drops and more:  https://account.forbes.com/membership/?utm_source=youtube&utm_medium=display&utm_campaign=growth_non-sub_paid_subscribe_ytdescript  Stay Connected Forbes newsletters: https://newsletters.editorial.forbes.com Forbes on Facebook: http://fb.com/forbes Forbes Video on Twitter: http://www.twitter.com/forbes Forbes Video on Instagram: http://instagram.com/forbes More From Forbes:  http://forbes.com  Forbes covers the intersection of entrepreneurship, wealth, technology, business and lifestyle with a focus on people and success.

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00:00Today on Forbes, why AI stocks are giving some investors dot-com bubble deja vu.

00:07At the end of the 1990s, there was one narrative on every stockbroker's lips.

00:12The so-called World Wide Web would change everything about our way of life,

00:16the way we buy and sell goods, interact with friends, conduct research, and advance our careers.

00:22It would be impossible to imagine life without it.

00:26That narrative has come true on a scale beyond what many imagined.

00:30But it might not feel that way for the investors who bought into the craze.

00:34First, there was the crash in March 2000, which ultimately took the stock market down 49%.

00:39Even worse, had you held on to the 10 largest tech stocks by market capitalization from the beginning of 2000,

00:47all 10 would have lagged the S&P 500 by the end of 2015.

00:51Fast forward to today, and the only stocks that have pulled ahead of the broader market

00:56in that quarter-century span are Microsoft and Oracle.

01:00The rest, names like Cisco, Intel, Qualcomm, and IBM, have sorely disappointed investors.

01:08It's a cautionary tale for today's investors, who have bid prices up on the belief that artificial intelligence

01:14will revolutionize the world the same way the internet did.

01:17The information technology sector makes up more than 33% of the S&P 500 index,

01:24matching the levels of the dot-com bubble of the late 1990s.

01:28Semiconductor designer NVIDIA alone makes up 8% of the index,

01:32thanks to its $4.3 trillion market cap, up tenfold in three years.

01:38But even if AI is as transformative as most expect,

01:41the stocks that have been the biggest beneficiaries thus far may not be winners in the coming decades.

01:46Rob Arnott, founder and chairman of Newport Beach, California-based investment advisor Research Affiliates,

01:53says, quote,

01:54It's important to distinguish between the stocks and the companies.

01:58These are great companies with great products.

02:00Bubbles burst not because the story is completely wrong,

02:04but because around the margins the story is wrong.

02:06The story of the rate of growth, the time horizon of growth,

02:10is unrealistically optimistic,

02:11and the risk of competition eroding market share is underestimated.

02:15The S&P 500 is priced at about 30 times earnings today,

02:20significantly more expensive than the typical historical average of around 20.

02:25The NASDAQ 100 currently has a P.E., or price-to-earnings ratio, of 33.

02:31At the peak of the dot-com bubble in early 2000,

02:34the S&P 500 had a multiple of 34,

02:36and the NASDAQ 100 had one over 70.

02:39Most of that premium this year has been driven by tech stocks,

02:43which are trading at 41 times earnings and nearly 10 times sales as a group in the S&P 500.

02:50NVIDIA's P.E. multiple is 57,

02:52and it's worth 29 times its $148.5 billion in 12-month sales.

02:58Chipmaker Broadcom, which has gained more than 400% since the start of 2023,

03:04to surpass a $1 trillion market cap,

03:07is priced at 110 times earnings.

03:11The valuations are more baffling for some smaller companies.

03:14Shares of Palantir Technologies,

03:16which makes software for data mining,

03:18have exploded by 2,400% since the start of 2023.

03:22Its business has grown to $3.4 billion in sales in the last 12 months,

03:27up 39% year-over-year,

03:30and it has become profitable,

03:31but its market value is now more than 100 times that revenue figure.

03:36Advanced Micro Devices,

03:38another chipmaker that's risen 100-fold in the last decade,

03:41is priced at 97 times earnings.

03:44Those premiums have continued rising throughout the summer.

03:48The S&P 500 is up 30% since April 8th,

03:51making a 19% tariff-induced plunge earlier in the year,

03:55a mere blip,

03:56and quickly reaching new record highs.

03:59The Global X Artificial Intelligence and Technology ETF

04:02is up 43% in that span.

04:05A generation of investors has been taught to, quote,

04:08buy the dip at any sign of trouble

04:10and been rewarded for that confidence for 16 years.

04:13So despite anxiety over tariffs,

04:15inflation,

04:16and a weakening job market,

04:18money keeps flowing in.

04:19Jim Stack,

04:21president and founder of Investec Research,

04:23says, quote,

04:24In the early stages,

04:26it's driven by FOMO,

04:27a fear of missing out.

04:28But as the bubble matures,

04:30it's basically a nervous complacency

04:31that pulls people into the market.

04:34It's not like they're expecting big gains,

04:36but they just can't stand not to be in it.

04:38For full coverage,

04:40check out Hank Tucker's piece on Forbes.com.

04:45This is Kieran Meadows from Forbes.

04:47Thanks for tuning in.

04:49Thank you for tuning in.

04:52We'll see you next time.

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