On the drive home from vacation, there’s always a point when someone in the back seat asks the classic, “Are we there yet?” You glance at Waze (my preferred navigation app), check the fuel, keep a steady hand on the wheel, and give your best estimate based on what you see. And if you’re lucky, as we were driving home yesterday, the forecast is correct and you manage to make it 423 miles without stopping. And on the part where you give your best estimate, that’s a decent way to think about today’s AI‑led market. Since ChatGPT arrived in late 2022, investors have been asking a version of the same question: Are we in a bubble, or simply early on a long road trip?
What looks the same
The mid-1990s brought us Netscape Navigator, which took the web from a niche to mainstream. ChatGPT did something similar for AI. If you plot the Nasdaq from Netscape’s release in December 1994 and compare it to the Nasdaq since ChatGPT’s launch in November 2022, the paths line up unusually well. Over the first 664 trading days (about 2.5 years on the calendar), the correlation is 0.94 (and for those of you still brushing up on your statistics, 1.00 is perfectly correlated).
Post-Netscape, the Nasdaq was up about 120% at this point; post-ChatGPT, it’s up roughly 92%. If you treat the timelines as mile markers, today aligns with approximately August 1997. Back then, headlines were already questioning “froth” and whether the rally could continue. It did, for nearly three more years, before peaking in early 2000. The rhyme is hard to ignore. History rarely repeats, but it often hums the same tune.
What’s different this time
The broader market isn’t keeping the same pace. Through the comparable point in the 1990s, the S&P 500 was up more than double what it has gained since the launch of ChatGPT. Leadership was wider, with many sectors posting 100%‑plus gains. This time, the big winners are concentrated in the Technology and Communication Services sectors.
Valuations are also higher now than they were at the same “mile.” The S&P 500 trades around 27x earnings versus about 22.5x in August 1997. Tech sits near 41.3x versus 32.1x then. Price‑to‑sales gaps are even larger: roughly 3.2x for the S&P today versus 1.6x in 1997, and 9.6x for Tech versus 2.7x. Some of this reflects lighter, less capital‑intensive business models (higher margins yielding higher multiples), but it still means we’re starting from a richer base.
Market concentration is the other big distinction. The ten largest stocks made up nearly 40% of the total market cap at year‑end 2024, compared to a then‑alarming 25% at the dot‑com peak. Tech alone accounts for about 34% of the S&P 500 today, already near its 1999–2000 highs. In August 1997, Tech was closer to 15%. The index is simply more dependent on a handful of platforms continuing to execute.
However, there is a nuance on fundamentals. Profits are stronger for the leaders today than they were in 1999. The top ten stocks accounted for nearly 29% of total market earnings at year-end 2024, compared to 16% in 2000. And there are differences within the infrastructure names as well. During the dot-com era, Cisco’s price decoupled from its fundamentals, with a P/E nearing 200 by March 2000. NVIDIA’s stock has soared, but earnings have also surged, pulling its P/E down from over 194 in June 2023 to about 50 by the end of 2024. Even so, its price-to-sales ratio of over 25 keeps expectations high and leaves little room for disappointment.
What that means for investors
The parallels raise fair questions. Narratives can be largely accurate and still get ahead of themselves when everyone tries to own the same outcome. If AI adoption takes longer than expected, or if leadership rotates, the index’s heavy concentration could amplify the downside. The dot-com era is a cautionary example: Of the “Four Horsemen” (Cisco, Dell, Intel, Microsoft) that led the dot-com surge, Cisco and Intel have never surpassed their 2000 peak.
No one knows whether we’re early, late, or somewhere in the middle. What we can do is set up portfolios that don’t rely on a single answer. Keep exposure to the trend, but size it with today’s starting valuations in mind. Diversify beyond mega‑cap Tech and its closest cousins. In other words, stay on the road without betting the trip on one lane staying open.
The bottom line
While the Nasdaq’s performance since ChatGPT’s release strikingly mirrors that of the Netscape era, current valuations and market concentration indicate that the market is in a more advanced stage than the comparable point in the 1990s. The AI revolution, like the Internet before it, is undeniably transformative. However, as with any period of intense technological excitement, the future is inherently unpredictable, and narratives can drive markets to extremes. A resilient investment framework that focuses on real diversification with a balanced approach can help us navigate the inherent volatility and ensure we stay on the road, whether we’re still at the beginning or nearing the end of the journey.
So, are we there yet? Probably not if you’re staring at the odometer. Possibly closer than it feels if you’re watching the dashboard. Keep driving, keep checking the gauges, and make sure the portfolio can handle a longer ride or a sudden slowdown. That’s how you arrive either way.
Markets / Economy
- Markets seem to be defying gravity at this point, as equities were higher again this week. The S&P finished the week up 1.5%, the Nasdaq was up 1.0%, and the small-cap Russell 2000 was up 0.9%.
- U.S. existing-home sales fell 2.7% from the previous month to a seasonally adjusted annual rate of 3.93 million units in June, down from 4.04 million in May and below market expectations of 4.01 million.
- Median home price climbed to $435,300, the highest ever recorded for June and the 24th consecutive year-over-year price increase.
Stocks
- U.S. equities were in positive territory. Healthcare and Materials were the top performers, while Technology and Consumer Staples lagged. Value stocks outperformed growth stocks, and large-cap stocks outperformed small-cap stocks.
- International equities closed higher for the week. Developed markets fared better than emerging markets.
Bonds
- The 10-year Treasury bond yield decreased five basis points to 4.39% during the week.
- Global bond markets were in positive territory this week.
- Corporate bonds led for the week, followed by government bonds and high-yield bonds.
