Historical perspective on market valuations reveals an uncomfortable truth: only the dotcom bubble exceeded current P/E levels. The comparison invites obvious questions—and demands careful analysis.
Source: Goldman Sachs, The Financial Times
The data is stark. By most valuation metrics, markets trade above levels seen at any point except 1999-2000. The concentration in a few mega-cap tech names amplifies the comparison—today’s “Magnificent Seven” echo that era’s darlings.
Bulls offer valid distinctions. Today’s expensive companies generate massive profits; dotcom leaders often had no revenue. Interest rates were higher in 2000, making equity valuations less justifiable. And today’s tech giants have proven moats that dotcom speculation lacked.
Why It’s Similar (Possibly)
Bears note the pattern: every bubble features compelling narratives explaining why “this time is different.” The internet really did change everything—just not fast enough to justify 2000 valuations. AI may follow the same path: transformative but overhyped in the short term.
The margin of safety concept applies: at current valuations, everything must go right. The asymmetry favors caution.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
