Tech valuations mirror 1999 dot-com bubble
The guest argued that despite strong current earnings, the stock market is in highly valued bubble territory with a Shiller PE ratio of 42, closely mirroring the setup of the 1999 dot-com peak.
The argument
While bulls argue that current earnings growth (27.7% in Q1) justifies high valuations, the guest countered that Q4 1999 saw similarly high earnings estimates before the market rolled over. He warned that price often leads fundamentals in hype cycles, making current forward returns potentially weak.
The thesis, stress-tested
✓ What validates it
- ✓Shiller PE ratio exceeding the 1999 peak of 44
- ✓Forward earnings estimates beginning to roll over in Q2 or Q3
▸ Risks discussed
- ▸Earnings growth could continue to outpace expectations, keeping PE ratios flat
- ▸Hyperscalers have stronger balance sheets today than telecom spenders did in 1999
Hear it yourself
"And so this starts to get baked into the sort of the psychology of the market, the narratives within the market, and if you start to see some interesting growth behind that narrative, which we are absolutely seeing on AI, we've seen the new models that are coming out. Each one is stronger than the last one. The, earnings of some of these companies, we've seen anthropic, reporting, just the growth in revenues that they've seen. So now, you know, this sort of narrative that's already gotten kinda baked in is now being validated by growth and the numbers."
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