Investors have seen a strong recovery since early April, with the Nasdaq Composite rising about 40% from the April 8 low amid a decade-long technology bull market. Rapid digitalization, cloud computing, streaming, digital advertising, pandemic-driven device and remote-work adoption, and generative AI such as ChatGPT have fueled investor enthusiasm. Tech-sector valuations now look elevated relative to other stocks and exhibit similarities to extremes reached during the late-1990s dot‑com boom. The dot‑com episode ended with the Nasdaq falling roughly 78% over three years after the March 2000 peak. Investors should re-evaluate allocations and consider caution given heightened valuation and drawdown risk.
Since the April 8 low, the Nasdaq Composite (NASDAQINDEX: ^IXIC) has appreciated an incredible 40%. And of course, that recovery has taken place amid a decade-long bull market in technology growth stocks. It's easy to understand why. Society is becoming more digital and automated. The last 10 years have seen the emergence of cloud computing, streaming video, digital advertising,
Echoes of the dot-com era? In several ways, technology stock performance and valuations are currently mirroring the extremes of the dot-com boom of the late 1990s. Unfortunately, we all know how that period ended, with a terrible "bust" that sent the Nasdaq tumbling three years in a row, eventually culminating in a 78% drawdown from the March 10, 2000, peak.
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