Does the AI Boom Resemble the Dot-Com Meltdown? Here's What the Data Shows.

Market Comparison - The current artificial intelligence (AI) boom is being compared to the dot-com bubble that preceded the 2000 crash, raising concerns among investors about potential market risks [1][2] - The S&P 500 Shiller CAPE Ratio is close to levels seen during the dot-com bubble, indicating potential overvaluation in the market [3] Capital Expenditures and Profitability - Michael Burry's analysis shows that capital expenditures (capex) by S&P 500 and Nasdaq-100 companies are expected to reach all-time highs, reminiscent of the dot-com era [5] - Despite significant capex spending by major tech companies, concerns exist regarding depreciation accounting that may inflate earnings [6] - During the dot-com bubble, 36% of tech stocks were unprofitable, while currently only 19% of tech stocks are unprofitable, indicating a healthier profitability landscape [8] Financial Health of Tech Giants - Major tech companies like Microsoft and Meta Platforms are funding the AI boom with substantial free cash flow, contributing to a more stable financial environment compared to the dot-com bubble [9] - The information technology sector's net debt was only 1% of its market cap as of August, suggesting a relatively low debt burden [9] - Although some tech giants are beginning to take on more debt for AI initiatives, current debt-to-equity ratios are not alarming [10] Investment Strategy - Investors are advised to focus on companies benefiting from AI that are not solely AI-focused, such as Microsoft and Alphabet, which have diversified business models [13]