By Daniel McGarvey, CFA, Senior Portfolio Analyst, on behalf of Stonebridge Financial Group advisors

NTM P/EsThe U.S. stock market has had quite an impressive run since the pandemic hit four years ago, and many of the gains since 2022 have been catalyzed by artificial intelligence (AI)-focused technology and communication stocks. The emergence of this potentially transformative technology, coupled with high valuations, naturally invites comparison to the dot-com bubble of the late 1990s, a period that ended up being a painful memory for most investors.

The rise of artificial intelligence is similar to the advent of the internet in the sense that it promises to increase productivity and revolutionize the way we work, with the companies expected to benefit the most (like Nvidia today or Cisco in the ‘90s) priced with very little margin to underdeliver on those promises. AI has a long way to go from the stage we’re in now, and not every company trying to profit from it will be able to survive.

However, despite similar levels of enthusiasm and potential, the AI craze does not look as bubble-like at this point. There is less of a general market mania, and valuations are not as stretched as they were 24 years ago. As shown in the following chart, the forward price-to-earnings ratio of the largest 50 stocks in 2000 was 31 compared to 22.2 today, even with higher Treasury rates and inflation. Flows into equities were also far more aggressive in proportion to total flows back then.

Additionally, this year’s run-up is backed up by strong earnings. Profits for stocks like Nvidia have been climbing along with their stock price, which can be contrasted to many of the expensive dot-com era stocks that never ended up making any money. This time around, the question might be less about whether companies will make money and more about whether the demand for AI-related chips and software can continue at its expected level. Major political figures and investors are already assuming that AI will transform global economies, as they did with the internet, so the bar is set high for ongoing demand.

Although today’s market does not seem as manic or unreasonable as it did in the late 1990s, we are still navigating it with some caution. Many of the high-growth names that have driven returns recently are almost priced for perfection, and concentration risk is higher than it ever has been. AI stocks could keep climbing up, but we are very aware of the risks that would come from overweighting them.


In May, the S&P 500 was driven by strong earnings to reach new highs and return 4.96%. The Bloomberg US Aggregate Bond Index returned 1.7% as the 10-Year Treasury Rate fell from 4.7% to 4.5%, and the Federal Reserve chose to keep rates in the 525-550bps range.

Market Indictors charts


Charts provided by Strategas Research Partners, LLC and YCharts, Inc.

Material discussed is meant for general/informational purposes only and it is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary therefore, the information should be relied upon when coordinated with individual professional advice. Past performance is no guarantee of future results. Diversification does not ensure against loss. The opinions and forecasts expressed are those of the author, and may not actually come to pass. This information is subject to change at any time, based on market and other conditions.

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Daniel McGarvey, Porfolio AnalystDaniel is a Portfolio Analyst at Stonebridge Financial Group and works on portfolio analysis and other related tasks. When away from the office, Daniel spends his time playing guitar, reading, and exploring the outdoors.