Welcome to Tidal Wave, an investment and research newsletter about software, internet, and media businesses. Quick disclaimer: this is not investment advice, and the author may hold positions in the securities discussed. About once every two weeks, as I am doom-scrolling Twitter, a thought crosses my mind:
Great breakdown of the dot com bubble dynamics! What’s unique about this current AI bubble is it’s forming in the context of a tight (and tightening) monetary environment, which is unusual. That said, the AI bubble is really limited to a handful of tickers, which is obviously very different than a market-wide bubble.
One parallel (or perhaps non-parallel) between 2022 and the dot-com era was how insistent everyone was that the July/August 2022 bounce was a bear market rally that would precipitate a violent move downward (a la Q4 2000). I remember seeing much of fintwit completely convinced the Nasdaq was headed below 6,000. Turns out it was a bear market rally indeed but the new lows weren't much lower than the prior lows. Now maybe we should be worried about another enormous leg downwards but unless that happens, a lot of people will have missed out buying in H2-22 because they were expecting 2022 to rhyme with 2000.
The other striking different between 2000 and 2022 is how widely divergent the NASDAQ has been from the speculative/non-profitable tech index (in 2000 I presume more of these sorts of names would have been represented in the NASDAQ), as you show in your included charts. The NASDAQ chart looks like a market that narrowly escaped another dot-com blowup; whereas in the non-profitable tech chart we're in the equivalent of summer 2003.
Impeccable work! The tech bubble is a total catch-22 😂