Not a Dot-com Bubble Redux
The Magnificent Seven and other tech sector leaders have been delivering growth far exceeding that of dot-com era companies
Chief Investment Office29 Feb 2024
  • Comparisons between Big Tech and Dot-com Tech largely unjustified
  • Unlike their predecessors, Big Tech has solid earnings growth to support rallying prices
  • Tech leaders today have solid balance sheets and financial muscle to engage in value-accretive M&A
  • The world has vastly changed since 2000 and now revolves around technology
  • Anchor with DBS CIO I.D.E.A to ride the wave of Big Tech and other key areas of quality growth
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Comparisons aplenty, but not all are fair. Given the stellar rally of Big Tech and technology stocks over the past year, it was inevitable that parallels would be drawn to the dot-com bubble of 2000. In fact, market observers have gone as far as comparing Nvidia to the dot-com era Cisco, citing similarities in the steep run-up in prices as well as their poster child status within the tech space. While such comparisons are understandable – the price momentum and sectors involved in today’s tech rally do bear some resemblance to dot-com – we believe that they should be taken more as food for thought than a direct cautionary tale. This is because, barring some of the superficial similarities highlighted above, the world and the technology sector today is vastly different from what it was during the dot-com bubble.

Not an asset bubble in the making. While the dot-com crash was a painful event for many investors, it served an important function of trimming the fat in the US stock market. After the bubble burst in 2000, many companies that sought to ride the novelty of the dot-com concept wound up after burning through their funding and failing to become profitable. What remained were companies that had solid fundamentals, many of which became highly profitable and successful. Many of these surviving names have now become part of today’s Magnificent Seven. And the important thing to note about these companies is that, unlike their dot-com era predecessors, their share price performance is backed up by sound fundamentals.

Figure 1: Backed by fundamentals – Big Tech rally still has legs


Source: Bloomberg, DBS


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