From Dot-com to AI: is history repeating itself ?
source: Yael Potjer
The American Crescat Capital is a lot more negative. What is their analysis of the situation? Frank says that shares are the first alternative to saving for the masses.
Stock ownership is indeed extremely popular again among Americans. Currently, 62% of adults there own stocks. For the first time, this is the level before the crisis in 2008 and the dot-com bubble of 2000.
It is therefore perhaps not surprising that asset manager Crescat Capital makes a comparison with that period in a recent analysis. american_adults_that_own_stock Percentage of American
adults who own stocks (source: Motley Fool) 2024 vs. 2000 Advances in AI technologies, like the Internet in 2000, promise growth through significantly higher productivity.
The valuations of the leading technology companies are even higher today than they were then. This implies future profit growth rates that Crescat believes will be impossible to achieve.
They make the comparison between the most valuable company then and now. Cisco Systems was the most valuable company in the world at the height of the dotcom bubble in 2000.
The company was then worth $548 billion, 37 times the company's revenue and 5.5% of US GDP. Nvidia recently achieved the status of most valuable company in the world with a
valuation of $3.3 trillion, a multiple of 41 times sales and a record high of 11.7% of total US GDP more than twice the performance of Cisco in 2000. Nvidia_2000_2024 Nvidia vs. Cisco
Not only Nvidia is overvalued according to Crescat.
If you look at the combined value of the top ten tech stocks relative to US GDP in 2000 and today, the current valuation is about twice as large.
The peak in 2000 was 30% of GDP, now this is 60%. This is a relevant number because the economy can only grow so much and there are limited resources available
to drive the profits and multiples of competing companies. Many companies compete for the same market share. AI is a disruptive technology that offers
new companies opportunities at the expense of established (tech) giants. According to Crescat, this process, which Joseph Schumpeter called creative
destruction, could cause a significant bear market for major technology stocks and the S&P 500. As an example, they cite the threat of using AI as a search engine for Google's business model.
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