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The artificial intelligence boom has put the world on notice that technology is eating the world.
Speculative bets on AI have raised concerns about a speculative bubble, yet the companies leading the charge like Nvidia, Meta and the other Magnificent 7 giants continue to report record cash flows and profits.
Just because today’s tech dominance resembles that of the dot-com era doesn’t mean AI is something destined to pop — even if there are instances of financial wizardry afoot.
The data point to a structural shift into a more productive era built on new technology and underpinned by gobs of cash and resilient fundamentals.
This is illustrated by the Nasdaq-to-Dow ratio, which shows how markets fluctuate between real economy stocks and technology.
Some will use this same chart as justification for a bubble, but look how violently the index spiked and collapsed in 2000.
The recent, more gradual climb started in the early 2010s as earnings and margins climbed with stock prices.
Bubbles pop when technology fails to monetize. The companies pushing AI forward are the most profitable businesses in history and help drive real productivity gains.
Meanwhile, the S&P 500’s P/E ratio remains well below dot-com levels.
That, too, serves as a reminder that Big Tech today is more profitable and less expensive relative to the broader market than it was two decades ago.
The same narrative holds when you zoom in on a company level.
Cisco and Oracle once traded at more than 120x forward earnings, while names like Nvidia and Apple today hover at about one-quarter of that.
In the late 1990s, investors paid infinite multiples to own shares in companies with no profits.
In 2025, they are arguably paying a discounted rate for dominant firms that have been generating meaningful returns for years.
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Phil Rosen
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