Twenty five years after the dot-com bubble, its shadow is creeping back into markets. U.S. stock valuations are now the most expensive they’ve been since the late 1990s, and the comparisons are getting harder to ignore. Cisco $CSCO ( ▲ 2.6% ) , the emblematic winner of the dot-com era, recently returned to the market value it last touched at the peak in March 2000, a reminder of how far prices can drift from fundamentals during technology booms.
Bulls insist this time is different and that AI will justify today’s prices. Maybe they’re right. But the similarities between now and the dot-com era are striking, even if there are a few important differences.
Valuations Are Back in Rare Air
By almost every major metric, U.S. equities are stretched. Forward price to earnings ratios, price to cash flow measures, the Fed model comparing stock yields to bond yields, and cyclically adjusted PE ratios all point to valuations last seen during the dot-com bubble. As in 1999, investors are paying up for the promise of extraordinary future growth driven by a new technology.
The logic is familiar. If AI delivers rapid productivity gains and outsized profits, higher multiples make sense. The risk is that expectations are once again racing ahead of reality.
Big Bets, Big Spending, and Unproven Economics
AI today mirrors the dot-com era in its uncertainty. Generative AI products look almost magical, but many are still priced below the cost of producing them, leading to sizable losses. The difference from the 1990s is that today’s AI leaders at least generate real revenue, whereas many dot-com companies had none at all.
The investment cycle also looks eerily similar. In the late 1990s, telecom firms poured more than 100 billion dollars into fiber optic networks, much of which sat unused for years. Today’s equivalent is the race to build massive data centers, with spending estimates reaching into the trillions. Economists say AI infrastructure is now contributing meaningfully to GDP growth.
Back then, Cisco $CSCO ( ▲ 2.6% ) sold the routers that powered the internet boom. Today, Nvidia $NVDA ( ▲ 3.74% ) is supplying the chips that power AI data centers. Nvidia’s revenue growth has even surpassed Cisco’s dot-com era expansion, fueling investor excitement and reinforcing the boom narrative.
A Narrow Market and a Retail Echo
Market behavior is also starting to rhyme. In 1999, most stocks in the S&P 500 fell even as internet names soared. This year, more than a third of the index is down while anything tied to AI, chips, power, or data centers has surged.
Retail traders are once again gravitating toward smaller, often loss-making companies. The Russell 2000 has outperformed profit-only benchmarks in a pattern that has appeared only a few times before, most notably during the dot-com bubble and the 2020–2021 speculative surge. Robinhood Markets $HOOD ( ▲ 4.52% )
has jumped sharply this year, echoing the explosive rise of online brokerages during the late 1990s.
There are differences. The gains in today’s AI leaders, while large, still fall short of the extremes seen in 1999, when stocks like Qualcomm rose more than 2,000 percent. Whether this era becomes another bubble will depend on what comes next. If AI delivers both transformative productivity and sustainable profits, the parallels may fade. If not, history may be repeating itself faster than investors expect.