Twenty-five years after the dot-com bubble saw internet hype grip markets — and then spectacularly unravel — AI is once again fueling market frenzy.
However, there are some key differences in how investors are approaching today’s market compared to the dot-com boom era, according to Ben Snider, an executive at Goldman Sachs who will imminently become its US equity chief.
Today’s investors are focused on tangible, near-term earnings rather than speculative long-term potential of AI, said Snider, in an episode of Bloomberg’s Odd Lots podcast, published on Monday.
During the dot-com bubble of the late 1990s, they tried to look forward and estimate the long-term productivity gains and economic benefits of the internet, which caused valuations to expand dramatically, Snider said.
“Today, investors are saying we saw what happened that time. It’s too hard. And so what we’re really going to focus on is the earnings today,” Snider said.
That’s why the market has been focusing on things like semiconductors, hyperscalers, and power companies, Snider said.
Speculative activity is also down compared to the dot-com bubble, the Goldman Sachs executive said.
A few months ago, Goldman Sachs built what it calls a Speculative Trading Indicator, a gauge for how much trading activity is attributed to unprofitable stocks, penny stocks, or stocks with high valuations.
The tool shows that speculative activity is still “well below levels that we saw 25 years ago and even five years ago in the 2021 experience,” said Snider.
“I think this has been one of the least enthusiastic markets that is often described as a bubble in recent history,” he added.
Fellow Goldman exec, Jan Hatzius, who also appeared on Monday’s podcast episode alongside Snider, had a warning for AI enthusiasts betting on the technology’s ability to drive the economy.
Hatzius, who is the bank’s chief economist and head of research, said that though mega tech stocks are booming, “close to 0%” of US GDP growth can actually be attributed to AI in 2025.
Goldman’s chief economist reasoned that goods that are being invested in the AI sector are largely imported, and semiconductors are treated as intermediate inputs, not as investments.
“When we look at the impact of AI investment on measured GDP growth, on the numbers that are actually being printed, we’re getting only about 20 basis points of contribution over the last three or four years, and pretty close to zero over the last year,” he said.
Read the original article on Business Insider
The post There’s a key difference between how investors are behaving now and during the dot-com bubble, Goldman Sachs exec says appeared first on Business Insider.
