The dot-com era's highest-profile analyst says there will be

[source image]
Dow Jones NewsSep 15, 12:04 PM UTC
MW The dot-com era's highest-profile analyst says there will be a big AI bust

By Steve Goldstein

 

Henry Blodget on the similarities, and differences, between now and the dot-com bubble

 

The current AI era has strong parallels with the dot-com's landscape, says Henry Blodget.

 

The latest round of U.S. and Chinese trade talks seemed to be going swimmingly until a tape bomb dropped that China found Nvidia broke antitrust laws. More on that later.

 

But Nvidia is a convenient launching point for a discussion of the current AI-led stock-market rally with the inevitable discussion of whether it's a bubble or not. Cyclically adjusted, the S&P 500 SPX is trading close to its 2022 peak of 38 times trailing 10 years' earnings, which was only bettered during the dot-com bubble, points out Morgan Stanley strategists.

 

Few people are more closely associated with those days than Henry Blodget, then a star analyst before a Securities and Exchange Commission lawsuit permanently barred him from the industry. He then founded Business Insider and ran the company until after its sale to Axel Springer.

 

Blodget is back with a Substack post on the eerie parallels.

 

"As with the Internet, AI's impact is already extending far beyond the "tech industry." AI infrastructure investments are so vast - at least $400 billion this year - that they are turbocharging the global economy and stock markets," he says. "So, if the AI boom turns to bust, the shock waves will likely reverberate far beyond the tech industry."

 

He does note two big differences. One is that much of the AI action is being funded in private markets, so that if there is a bust, fewer retail investors will have been harmed. The other key difference is much of the buildout is being financed by earnings from the giant tech companies, rather than debt.

 

"Yes, in an AI bust, there will be plenty of pain. Stock markets and commercial real-estate will get poleaxed, colossal data-center projects will get sold for peanuts, and hundreds of startups and service providers will go bust. But, at least for now, the damage will be... contained," he says.

 

He discussed what he got right, and wrong, the last time.

 

He put in the correct ledger that the internet was a profound technology that would disrupt the global economy, that the internet craze in the late 1990s was a bubble and that most early internet companies would die or never reach their highs. What he gone wrong was that the crash would be so devastating that even the best companies got crushed, and that the number of early leaders that would survive over the long term would be counted on one hand.

 

He recounted the search engines that thrived before Google came in and dominated. "Similarly, today's LLM giants may get leapfrogged by future entrants. These companies require vast capital and energy to operate. Their rate of improvement relative to the required investments is slowing. And no matter how much 'comput'" the companies use, the next big leap always seems a year or two away," he said.

 

On the flip side of course is that there will be some winners. Blodget became famous in part because of his prescient call on Amazon. "Barnes & Noble, Walmart, and other massive retailers that initially pooh-poohed the Internet never caught up with Amazon. Executives who dismissed e-commerce and other Internet trends as 'fads' were soon relieved of command. Investors who declared Internet stocks 'too expensive' underperformed for years," he said.

 

The key question, he says, is if we are years before the bust or months. "Is it 1996 or 1999," Blodget asks. "I would respectfully suggest that there's no way to know for sure."

 

The market

 

U.S. stock futures (ES00) (NQ00) were leaning higher, but not much was moving, after last week's strong gains for the S&P 500 SPX.

 
Key asset performance Last 5d 1m YTD 1y S&P 500 6584.29 1.59% 2.09% 11.95% 17.03% Nasdaq Composite 22,141.10 2.03% 2.40% 14.66% 25.20% 10-year Treasury 4.06 1.70 -28.00 -51.60 43.70 Gold 3682.3 0.13% 9.01% 39.52% 41.08% Oil 62.92 0.74% 0.54% -12.45% -10.75% Data: MarketWatch. Treasury yields change expressed in basis points

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.

 

The buzz

 

U.S. and Chinese trade negotiators were meeting in Madrid for a second day.

 

China said Nvidia (NVDA) broke antitrust laws but also said it was continuing an investigation.

 

Google (GOOGL) was sued by the publisher of Variety on antitrust grounds.

 

Tesla stock (TSLA) is up over 6% after a filing revealed CEO Elon Musk bought shares.

 

Best of the web

 

Fraudulent Texas unemployment filings caused national spike.

 

Elon Musk's xAI reportedly lays off 500 workers tasked with training Grok.

 

French pensioners have higher incomes than working-age adults.

 

The chart

 

Danny Dayan, a former hedge-fund manager, constructed a chart showing CPI if it were calculated using the pre-1983 method for housing, which used to be calculated in a way considering both housing's investment and consumption value. It's a point made by others including former Treasury Secretary Larry Summers, and while there's logic in only considering the consumption value of housing, it may help to explain why the public is so sour on the U.S. economy as reflected in consumer sentiment surveys. Dayan, who posted his chart on X, also was challenged about the idea, since inflation that high would've meant the U.S. economy didn't grow at all over the last five years and that there's a productivity slump.

 

Top tickers

 

Here were the most active stock-market tickers on MarketWatch as of 6 a.m. Eastern.

 
Ticker Security name TSLA Tesla NVDA Nvidia OPEN Opendoor Technologies GME GameStop AAPL Apple PLTR Palantir Technologies NIO Nio AMD Advanced Micro Devices AMZN Amazon.com ORCL Oracle

Random reads

 

This real-estate agent sells to wealthy clients by mocking them.

 

The hallucinogenic mushroom that former Treasury Secretary Janet Yellen famously consumed is now the main ingredient in a coffee.

 

In Ghana, 'fantasy' coffins are designed in the shapes of colorful fish, crabs and even airplanes.

 

-Steve Goldstein

 

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

 

09-15-25 0804ET

 
Copyright © 2025 Dow Jones & Company, Inc.