The global market experiences déjà vu: AI replaces dot-coms and Nvidia becomes the new Cisco. Curiously, investors strive to stay trendy without creating a bubble.
Amid record highs in US stock market indices and Nvidia’s market capitalization surpassing $4 trillion, more and more market participants borrow hedge fund strategies of the late 90s. It looks like riding the wave but leaving the beach before the storm hits.
During the internet boom, hedge funds did not challenge the bubble but smartly followed it. As a result, they managed to outperform the market by 4.5% each quarter. Today, the logic remains the same. “We’re doing what worked from 1998 to 2000,” Francesco Sandrini from Amundi says. He highlights the first signs of “irrational exuberance” — excitement in options trading for AI company stocks. Instead of attempting to time a market collapse, he is searching for the “second wave”—less appreciated companies in software, robotics, and Asian technologies.
Market veteran Simon Edelsten from Goshawk Asset Management, who personally witnessed the dot-com era, shares a blunt perspective: “Companies are spending trillions fighting for a market that doesn’t exist yet.” He suggests that the next phase of the “AI frenzy” could spill over into related industries—from IT consulting to Japanese robotics. His conclusion is simple: “When someone discovers gold, find the store that sells shovels.”
Some are taking this literally. Fidelity International is betting on uranium, anticipating that the growth of AI data centres will lead to increased energy consumption. Meanwhile, Carmignac is redirecting profits from the Magnificent Seven into more niche companies, such as Taiwanese firm Gudeng Precision, which supplies equipment to chipmakers.
However, not everyone shares this enthusiasm. Analysts warn that no technological revolution has ever occurred without extreme things. Pictet Asset Management identifies the “bricks of the bubble”: although growth is evident among AI companies, it is rarely consistent. Senior strategist Arun Sai reminds us that even when the fundamentals for Microsoft, Amazon, and Alphabet are strong, that does not make the stock market invulnerable.
Some prefer to observe all of this from a distance. Portfolio manager Oliver Blackburn from Janus Henderson is hedging American tech positions with European and healthcare assets, stating frankly, “We are living in 1999. The bubble just hasn’t burst yet.”
