Fears are growing of a new, sweeping financial crash

A familiar historical moment seems to be reliving on Wall Street in London and Hong Kong, as the current stock market, technology euphoria is increasingly compared to the era of the dot-com “bubble” of the late ’90s. Although technology stocks continue to climb to historic highs, many express concern that the market is ignoring deeper economic and geopolitical threats and the déjà-vu of the dot.com “bubble” era seems to be reviving…

Those who remember 1999

The similarities with 1999 are not limited to the valuations of technology companies. The intense investor optimism surrounding artificial intelligence, the massive influx of capital into technology stocks, and the feeling that “the markets are only going up” are strongly reminiscent of the period before the collapse of the internet “bubble”. Those who experienced the market collapse in 2000 are facing the current situation with greater caution, while younger investors have become accustomed to considering every decline as a buying opportunity.

The AI ​​“craze” and the tech stock rally

Artificial intelligence is at the center of today’s stock market explosion. Semiconductor companies, data centers, and Big Tech giants are recording impressive performances, despite the unstable economic environment. The Nasdaq has strengthened more than 20% since the lows of March 30, while the Philadelphia Semiconductor Index has recorded a rise of almost 70% in a few months. At the same time, investors continue to aggressively position themselves in the AI ​​sector, largely ignoring geopolitical developments and risks to the global economy. What is striking is that the rally continues despite serious international turmoil:

• wars in the Middle East and Eastern Europe,
• rising oil prices,
• inflationary pressures, and
• the slowdown in the US labor market

do not seem to have a significant impact on investment sentiment. However, market overconfidence often precedes sharp corrections.

The Historical Similarities That Are Worrying

Another worrying sign was recently recorded: the S&P 500 hit a new all-time high, while about 5% of its companies were at 52-week lows. This phenomenon suggests that the rise is overly concentrated in a few large technology stocks. Something similar has only happened three times in history:

• In July 1929
• In January 1973
• In December 1999

Two of the three previous cases were associated with major stock market crashes. At the same time, many investors argue that this time the fundamentals are stronger. Most large technology companies are profitable and have significant cash flows, unlike many loss-making companies of the dot-com era. However, despite signs of strong growth in technology stocks, concerns about a potential stock market “bubble” are returning, with many citing historical examples of excessive euphoria that resulted in sharp corrections. The current market picture, with the explosive rise of artificial intelligence stocks and the overconcentration of capital in a few large companies, is reminiscent of periods when optimism had outpaced the fundamentals of the economy. These conditions are often accompanied by intense monetary liquidity, investor overconfidence and a sense that the market “cannot fall”. In the past, such environments have led to excessive valuations in the technology sector and, ultimately, to violent corrections when expectations were not confirmed. Several conditions are forming today that hark back to previous periods of intense speculation.

Trust Economics’s Note

A special sensation was also caused by the report by Trust Economics, in which it states that today’s rally “resembles the last months of the 1999-2000 bubble”. Continuing, that stocks no longer move based on economic data or consumer confidence. Stocks do not rise or fall because of jobs or consumer sentiment. They rise steeply because they are already rising steeply (investors’ over-optimism fuels it). AI — artificial intelligence has evolved into the ultimate investment narrative of the era