Global investment firm GQG Partners has issued a stark warning that the current technology market is exhibiting “dotcom-era overvaluation,” with a combination of soaring capital spending and weakening fundamentals that could lead to repercussions more pronounced than the 1999 crash.
Current Conditions More Fragile Than Dotcom Bubble?
In a new research report titled “Dotcom on Steroids,” the firm argues that the AI-driven boom has pushed the tech sector to a dangerous inflection point, masking underlying risks for investors.
The report’s central thesis is that today’s market conditions are potentially worse than the dot-com bubble because of a “trifecta of rich valuations, increasing macro risk, and—perhaps most importantly—deteriorating company fundamentals.”
GQG argues that, unlike the past decade, the tech sector no longer represents forward-looking quality due to decelerating revenue growth and increasing competition.
“Today’s market, particularly in the tech sector, exhibits dotcom-era overvaluation, with lofty multiples, slower earnings growth, and a weaker macroeconomic backdrop, in our view,” the firm stated.
AI CapEx Explosion Much Higher Than The Dotcom Era
This view has been amplified by influential investors on X. A critical concern highlighted is the explosion in capital expenditure (CapEx) required to compete in the AI arms race. GQG notes that this spending is reaching levels seen at the peak of prior infamous bubbles.
“Big tech CapEx as percentage of EBITDA is now running at 50%-70%, which is similar to AT&T’s 72% at the peak of the 2000 telecom bubble and Exxon’s 65% at the peak of the 2014 energy bubble,” said Tobias Carlisle, the portfolio manager at Acquirers Funds.
GQG warned that historically, such high capital intensity leads to structurally poor investments.
Better To Invest Outside The Tech Sector?
Furthermore, the report pushes back on the perception that today’s tech companies are cheaper than their dot-com counterparts, arguing that on a growth-adjusted basis, they are actually more expensive.
Data shows that the share of S&P 500 companies trading at more than 10 times sales has already surpassed the 2000 peak, signaling widespread overvaluation. Due to these risks, GQG concludes it sees “better investment opportunities outside the tech sector.”
This view was also echoed by Meb Faber, the founder of Cambria Funds on X.
Price Action
Here is a list of some Big Tech firms and AI-linked exchange-traded funds that investors can consider.
| Stocks | YTD Performance | One Year Performance |
| Nvidia Corporation (NASDAQ:NVDA) | 23.12% | 50.21% |
| Apple Inc. (NASDAQ:AAPL) | -1.99% | 8.29% |
| Microsoft Corp. (NASDAQ:MSFT) | 21.85% | 18.39% |
| Amazon.com Inc. (NASDAQ:AMZN) | 5.18% | 24.24% |
| Alphabet Inc. (NASDAQ:GOOGL) | 31.73% | 56.14% |
| Meta Platforms Inc. (NASDAQ:META) | 29.45% | 44.20% |
| Tesla Inc. (NASDAQ:TSLA) | 12.28% | 87.44% |
| ETF Name | YTD Performance | One Year Performance |
| iShares US Technology ETF (NYSE:IYW) | 18.52% | 30.03% |
| Fidelity MSCI Information Technology Index ETF (NYSE:FTEC) | 16.06% | 28.38% |
| First Trust Dow Jones Internet Index Fund (NYSE:FDN) | 16.69% | 39.53% |
| iShares Expanded Tech Sector ETF (NYSE:IGM) | 20.89% | 34.46% |
| iShares Global Tech ETF (NYSE:IXN) | 17.28% | 24.46% |
| Defiance Quantum ETF (NASDAQ:QTUM) | 23.23% | 69.70% |
| Roundhill Magnificent Seven ETF (BATS:MAGS) | 18.32% | 42.24% |
The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, rose in premarket on Thursday. The SPY was up 0.72% at $663.96, while the QQQ advanced 1.05% to $596.18, according to Benzinga Pro data.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga
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