Despite the record highs that major stock market indices have been trading at since the beginning of 2024, coupled with the growth of the artificial intelligence (AI) sector led by semiconductor giant Nvidia (NASDAQ: NVDA), there are concerns about the trends. In February, it was reported that the current big tech bull market has an alarming level of concentration in stock market returns, similar to the trends observed before the Great Depression. Recently, it has been observed that mega-cap technology stocks, like Nvidia and Microsoft (NASDAQ: MSFT), are outperforming smaller companies by margins not seen in decades.
This trend is particularly worrying as it resembles the disparity seen during the Dot-com bubble. It is not the first time that the current state of technology stocks has been compared to the Dot-com era. In early April, Albert Edwards, a global strategist at banking giant Société Générale (EPA: GLE), warned that the AI boom has already created a dangerous bubble. Edwards, known for accurately predicting the start of the Dot-com crash, also noted that the Federal Reserve’s lack of restrictiveness and the high interest rates contribute to the creation of the bubble.
Furthermore, there are various systemic risks accumulating within the U.S. economy. While the technology boom is both frightening and exciting, two concerning aspects are the fluctuating inflation rates and the increasing national debt. The national debt has reached $34 trillion in total and approximately $101,000 per capita by the end of 2023, leading the International Monetary Fund (IMF) to issue a stern warning to the United States, stating that something will have to give.
Is Dot-com Bubble 2.0 Imminent? Mega-cap Tech Stocks Outperform Small Caps at Unprecedented Rates in Two Decades
