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.
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 😂