Are we in the midst of an artificial intelligence stock bubble reminiscent of the dot-com bubble of the late 1990s and early 2000s? According to a recent survey from Bank of America, 40% of fund managers think so, while 45% disagree and 15% are unsure.
But is this fear really justified? As someone who lived through the dot-com bubble, I can confidently say that today’s market is vastly different from the one that led to the infamous crash. Back then, individual investors were chasing after overvalued stocks like Pets.com, Boo.com, and Webvan, driven by a fear of missing out on the internet boom. But back in 2000, index funds were not as popular or widely available as they are today, leading many to take on risky bets with individual stocks.
Unlike the dot-com bubble, today’s market is supported by a more diversified base of investors, with trillions of dollars flowing into broad-based index funds like the S&P 500. While some concerns have been raised about the concentration of certain tech giants driving the market, the overall picture remains stable.
Even though some tech stocks saw tremendous gains in recent years, the market as a whole has delivered average returns consistent with historical trends. The recent gains in the S&P are a testament to the underlying strength of the market, despite fluctuations in individual stocks like Tesla, Microsoft, and Amazon.
While no one can predict the future of the market, it is important to differentiate between a high-priced market and a speculative bubble. The current landscape may have its challenges, but it is far from the extremes seen during the dot-com era.
So, while caution is always warranted in stock investing, there is no need to panic about a repeat of the dot-com crash. The lessons of history have shaped the modern market in ways that make it more resilient and less prone to the excesses of the past.
Allan Sloan is an award-winning journalist and contributor to Yahoo Finance.
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