AI Stock Pickers Face Dot-com Deja Vu Challenge

Investors focusing on artificial intelligence (AI) stocks are reminding observers of the dot-com era, when technology advancements caused market frenzies. Although stocks haven’t been driven to the same mania as in the Nineties, surges in technology shares are presenting a similar issue: how best to pick the winners and losers based on a technology whose economic potential has not yet taken shape. The quality of companies leading the gains is a key difference nowadays, according to Michael Mullaney, director of global market research at Boston Partners. Examples include Nvidia and Microsoft, he said. However, Nvidia’s soaring valuation is drawing comparisons to Cisco Systems just before the dot-com bubble burst, with the maker of networking systems reaching a market value of over $500bn. At its peak, Cisco’s price-to-revenue ratio hit over 60 times, compared to its current valuation of about four times. Kubernetes co-founder Craig McLuckie recently told VentureBeat that we aren’t in the AI era yet.