{"id":9735,"date":"2024-02-14T20:35:48","date_gmt":"2024-02-14T20:35:48","guid":{"rendered":"https:\/\/topat10.com\/?p=9735"},"modified":"2024-02-14T20:35:48","modified_gmt":"2024-02-14T20:35:48","slug":"the-wharton-professor-who-called-tech-stocks-a-suckers-bet-in-2000-before-the-dotcom-crash-says-we-arent-in-another-bubble-yet","status":"publish","type":"post","link":"https:\/\/topat10.com\/?p=9735","title":{"rendered":"The Wharton professor who called tech stocks a &#039;sucker&#039;s bet&#039; in 2000 before the dotcom crash says we aren&#039;t in another bubble\u2014yet"},"content":{"rendered":"\n<p>The recent rise of AI-linked tech stocks has been compared to the late \u201890s-early 2000s <a href=\"https:\/\/fortune.com\/2023\/10\/28\/artificial-intelligence-bubble-or-real-wall-street-research-reports\/\" target=\"_self\" rel=\"noopener\" class=\"sc-bd4ab706-0 dXixpY styledLinkColor \">dot-com era<\/a> by more than a few experts. But Wall Street\u2019s bulls and bears can\u2019t seem to agree on what phase of history we\u2019re repeating.<\/p>\n<div>\n<p>The optimists argue that the AI gold rush is just getting started, and the firms creating the \u201cpick and shovels\u201d of the modern era are set to benefit for years to come. As Wedbush\u2019s tech analyst Dan Ives put it last year, it\u2019s \u201ca <a href=\"https:\/\/fortune.com\/2023\/06\/12\/ai-dot-com-boom-tech-analyst-dan-ives\/\" target=\"_self\" rel=\"noopener\" class=\"sc-bd4ab706-0 dXixpY styledLinkColor \">1995 moment<\/a> with a long runway of growth ahead\u201d and not a \u201c1999 moment\u201d where markets are on the verge of collapse. But the bears warn that the AI hype is <a href=\"https:\/\/fortune.com\/2023\/07\/02\/ai-hype-curve-fourth-industrial-or-fomo-expert-predictions\/\" target=\"_self\" rel=\"noopener\" class=\"sc-bd4ab706-0 dXixpY styledLinkColor \">overdone<\/a>. Recalling the internet boom that drew in crowds of investors to high-flying, but often unprofitable, tech stocks in the late 1990s, Jeremy Grantham even <a href=\"https:\/\/markets.businessinsider.com\/news\/stocks\/us-stock-market-outlook-grantham-ai-bubble-crash-recession-economy-2024-2\" target=\"_self\" rel=\"noopener\" class=\"sc-bd4ab706-0 dXixpY styledLinkColor \">warned<\/a> this month that AI stocks are in a bubble that will soon burst. The Dow\u2019s 500-point wobble on CPI data suggesting higher-for-longer inflation (and interest rates) has some observers wondering if the beginning of the bubble popping is nearing in 2024.<\/p>\n<p>Even Jeremy Siegel, a veteran market watch and Wharton finance professor known for his <a href=\"https:\/\/fortune.com\/2024\/01\/09\/jeremy-siegel-goldilocks-economy-fed-markets\/\" target=\"_self\" rel=\"noopener\" class=\"sc-bd4ab706-0 dXixpY styledLinkColor \">sober<\/a> takes, warned in his weekly Wisdom Tree <a href=\"https:\/\/resources.wisdomtree.com\/weekly-siegel-commentary\/\" target=\"_self\" rel=\"noopener\" class=\"sc-bd4ab706-0 dXixpY styledLinkColor \">commentary<\/a> Wednesday that he\u2019s starting to see \u201cover-speculation\u201d in semiconductor stocks linked to AI.<\/p>\n<p>\u201cI won\u2019t call this a bubble at these levels, but there is a frenzy of excitement and many trend followers are piling on the AI wagon,\u201d he warned. \u201cThis can continue a long time until we get a big earnings miss, but we know if these trends last long enough, it does not end well.\u201d<\/p>\n<p>Still, when it comes to comparisons to the dotcom bust, Siegel is skeptical. And since he was right there, making prescient predictions just before the tech bubble popped, his words are likely worthy of attention.<\/p>\n<p>\u201cMany make analogies of the AI hype today to the internet boom in 2000,\u201d Siegel wrote Wednesday. \u201cI called out many of the big-cap tech stocks as a sucker\u2019s bet in March 2000 in my <a href=\"https:\/\/www.wsj.com\/articles\/SB952997047343478041\" target=\"_self\" rel=\"noopener\" class=\"sc-bd4ab706-0 dXixpY styledLinkColor \">Wall Street Journal op-ed<\/a> at that time. I don\u2019t think we are anywhere near levels that motivated that view.\u201d<\/p>\n<h2 class=\"wp-block-heading\">Nowhere near \u2018sucker\u2019s bet\u2019 territory<\/h2>\n<p>Siegel noted Wednesday that the S&amp;P 500 traded at over 30 times earnings in March of 2000, and large-cap tech stocks were selling at double those levels. \u201cInternet firms that had no earnings and traded at huge valuations\u201d were emblematic of the problem, he wrote, adding that \u201cthe market as a whole is much more reasonably priced now\u201d at roughly 20 times forward earnings.\u00a0<\/p>\n<p>Siegel believes that the economy is currently in a \u201cGoldilocks\u201d phase, with relatively low inflation and a strong labor market. If hiring starts to slow, he said he has faith that the Fed will cut interest rates to support growth.<\/p>\n<p>The economy is proving its resilience and stocks are not yet at bubble levels, according to Siegel, but he still recommended investors look for opportunities in the \u201cunloved non-tech segments\u201d instead of highly valued AI stocks, arguing there are \u201creal pockets of value\u201d in small-caps.<\/p>\n<p>\u201cWhile I don\u2019t think we\u2019re in a bubble yet, I think investors should be looking for broader participation in the markets,\u201d he wrote. \u201cIf the AI revolution is as real as I think it can be, it will not just benefit the mega-cap tech stocks. All firms will learn how to use and benefit from this great technology.\u201d<\/p>\n<p>Echoing Siegel\u2019s point about AI benefitting more than just mega-cap tech firms, Goldman Sachs\u2019 chief global equity strategist and head of macro research in Europe, Peter Oppenheimer, recently detailed the rise of technological revolutions throughout the past few centuries in his book <em>Any Happy Returns<\/em>.\u00a0<\/p>\n<p>In a follow-up <a href=\"https:\/\/fortune.com\/2024\/02\/10\/lessons-ai-investors-18th-century-canal-boom-oppenheimer-goldman-sachs\/\" target=\"_self\" rel=\"noopener\" class=\"sc-bd4ab706-0 dXixpY styledLinkColor \">conversation<\/a> with<em> Fortune<\/em>, he explained how investors can learn how to navigate the AI era by understanding the history of an underappreciated invention: canals. The canal boom of the 1700s revolutionized the transportation of cargo in the U.K., leading investors to flock to the companies that owned them. That eventually led to a boom and bust cycle in canal stocks on the London Stock Exchange. But while canal stocks weren\u2019t always winning investments, the canals themselves led to a huge productivity boom that helped the entire economy and stock market grow.<\/p>\n<p>The big lesson of it all: the long-term winners of the AI boom might not be the companies developing the technology, but the ones who can use it to create something new and profitable. Choose wisely.<\/p>\n<\/div>\n<div data-cy=\"subscriptionPlea\">Subscribe to the CFO Daily newsletter to keep up with the trends, issues, and executives shaping corporate finance. <a href=\"https:\/\/www.fortune.com\/newsletters\/cfodaily?&amp;itm_source=fortune&amp;itm_medium=article_tout&amp;itm_campaign=cfo_daily\" target=\"_self\" rel=\"noopener\" class=\"sc-bd4ab706-0 dXixpY styledLinkColor \">Sign up<\/a> for free.<\/div>\n\n","protected":false},"excerpt":{"rendered":"<p>The recent rise of AI-linked tech stocks has been compared to the late \u201890s-early 2000s dot-com era by more than a few experts. But Wall Street\u2019s bulls and bears can\u2019t seem to agree on what phase of history we\u2019re repeating. The optimists argue that the AI gold rush is just getting started, and the firms [&hellip;]<\/p>\n","protected":false},"author":248,"featured_media":9736,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_uag_custom_page_level_css":"","_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[123],"tags":[],"class_list":["post-9735","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.8 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>The Wharton professor who called tech stocks a &#039;sucker&#039;s bet&#039; in 2000 before the dotcom crash says we aren&#039;t in another bubble\u2014yet | Unlock Informed Choices with Us<\/title>\n<meta name=\"description\" content=\"The Wharton professor called tech stocks a &quot;sucker&#x27;s bet&quot; 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But Wall Street\u2019s bulls and bears can\u2019t seem to agree on what phase of history we\u2019re repeating. The optimists argue that the AI gold rush is just getting started, and the firms&hellip;","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/topat10.com\/index.php?rest_route=\/wp\/v2\/posts\/9735","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/topat10.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/topat10.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/topat10.com\/index.php?rest_route=\/wp\/v2\/users\/248"}],"replies":[{"embeddable":true,"href":"https:\/\/topat10.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=9735"}],"version-history":[{"count":0,"href":"https:\/\/topat10.com\/index.php?rest_route=\/wp\/v2\/posts\/9735\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/topat10.com\/index.php?rest_route=\/wp\/v2\/media\/9736"}],"wp:attachment":[{"href":"https:\/\/topat10.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=9735"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/topat10.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=9735"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/topat10.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=9735"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}