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In this issue:
- Global Equity Market Performance
- Browsing and Chatting
- Two Booms
- June So Far
- Wrapping Up
Global Equity Market Performance
Equity markets delivered another solid month. MSCI Emerging Markets rose 7.7% and the S&P 500 gained 5.2%, building on April’s strong 10% advance. MSCI EAFE added 4.2%. The S&P/TSX 60 lagged somewhat, rising only 1.7%. After outperforming the S&P 500 for the first four months of 2026, it ended May 0.7% behind but is still up 9.3% on the year.
As of this writing—the second week of June—our systems are indicating positive momentum in all four equity markets although there are still some signs of caution in the sector signals.
If you would like to stay current on our measures of trend and momentum in the markets we follow, please click here.
While the S&P 500 and the S&P/TSX 60 are having solid years, the Nasdaq 100 has outperformed both by more than 10%. The effects of the AI boom continue to ripple through the market in unexpected ways. In February’s letter we noted the surprisingly negative effect on the software sector—Microsoft (MSFT), down 19%, is having a tough year. Its contribution to the Nasdaq 100’s performance this year is -1.3%
Micron Technology (MU) on the other hand is having a great year, up 240%. Along with other chip makers Intel (INTC +210%) and Advanced Micro Devices (AMD +140%). Those three stocks account for nearly half of the Nasdaq 100’s performance.
This month we’ll look at the Nasdaq 100 and compare this version of a tech boom to the dot-com boom that began more than 30 years ago.
Browsing and Chatting
Versions of the internet existed long before it became widely accessible to the public. In the late 1960s, a U.S. military-funded network called ARPANET (Advanced Research Projects Agency Network) connected several universities and research institutions. (Al Gore was nowhere to be seen at the time.) What most people think of today as “the internet” is actually the World Wide Web, which was developed by Tim Berners-Lee between 1989 and 1991. He published the first website in 1991. While early browsers existed, they were primarily niche tools used by academics. The browser that really ignited the dot-com boom was Netscape Navigator, released in December 1994. Netscape went public the following year in August 1995.
Versions of artificial intelligence and large language models (LLMs) existed for decades before they became widely accessible to the public. In the 1950s and 1960s, early AI research projects connected academics and government institutions. What most people think of today as “AI” is actually the rapid rise of LLMs. While earlier AI systems existed, they were primarily niche tools used by researchers and large corporations. The model that really ignited the current AI boom was ChatGPT, released by OpenAI in November 2022. Within months, it became one of the fastest-growing consumer applications in history.
You’re not experiencing double-vision—the similarities are uncanny.
Let’s look at how the Nasdaq performed in the late 1990s, early 2000s compared to now.
Two Booms
We’ve created analogs before. As a reminder, these are not predictive and we don’t use them in our systems. But they are interesting because they illustrate the powerful effects of human behaviour on markets.
As noted above, the AI boom is having wide-ranging effects on many market sectors—just as the dot-com boom did. So it is reasonable to assume the Nasdaq 100 reflects the impacts of both.
Given that, we need a logical starting point for each era. While the August 1995 Netscape IPO is often seen as the start of the dot-com boom, the December 1994 release of Netscape Navigator is a better analog for ChatGPT’s November 2022 launch. Both products introduced game-changing technologies to the broader public, making them natural starting points for comparing the internet and AI eras.
Note: We are not the first to notice these similarities and create analogs. While we can’t point to one definitive source, this type of analysis is fairly common. As usual, we prefer to do our own work and ensure the assumptions make sense.
Considering all of the chatter about bubbles in the financial media these days, the result is a bit of a surprise.
By the end of June 1998—43 months after the launch of Netscape Navigator—the Nasdaq 100 index (base 100, starting November 1994) was 330. This May, 43 months after the launch of ChatGPT, the index was 266. That means the Netscape era Nasdaq 100 was 24% higher than the ChatGPT era Nasdaq 100 at the same point in their respective cycles.
In March 2000, the Nasdaq 100 peaked 230% higher than it was in June 1998. The actual Nasdaq 100 high monthly close was 4,397.84. We know what happened next. By September 2002, it had fallen to 832.52 — an 81% decline from its peak.
To repeat: this is simply a way to show how two different, but similar technological developments compare in their effects on the Nasdaq 100’s performance. It is not predictive.
It is, however, interesting. The AI era Nasdaq 100 is lagging the dot-com era Nasdaq 100 performance, if the assumptions the start dates are based on is valid. Starting points are important in any analysis.
We will revisit this subject after the first pure-play AI/LLM model company goes public.
June So Far
Lucky for us, Anthropic—the developer of the LLM named Claude—announced on its website June 1 it had filed its confidential intention to go public with the S.E.C. A week later, OpenAI—the developer of ChatGPT—did the same.
Bigger news came a week after that. On June 11, Dow Jones News reported that SpaceX had announced that they had sold 555,555,555 shares at $135 a piece and raised $75 billion. This put the value of the company at $1.77 trillion. This was the largest IPO ever, eclipsing the prior record set by Saudi Aramco in 2019—$29.6 billion raised at a valuation of $1.71 trillion.
On the first day of trading, June 12, 521 million SpaceX (SPCX) shares changed hands. The stock closed at $160.95, giving the company a market capitalization of $2.11 trillion.
On June 15, SpaceX announced the total raise was approximately $85.7 billion: including the full exercise by the underwriters of their overallotment option to purchase an additional 83,333,333 shares of Class A common stock from SpaceX.
On June 15, SpaceX closed at $192.40, up 19.5%.
Month-to-date, as of June 15, the S&P/TSX 60 is up 2.3% while the S&P 500 is down 0.4%.
Wrapping Up
Many pundits and talking heads have been in the media warning of an AI bubble. Maybe they’re right and this all falls apart.
Valuation metrics based on earnings or other financial statement items allow us to compare current price ratios to historical norms or averages. These comparisons can show when markets are unusually cheap or expensive.
Some analysts use macroeconomic factors for a top-down view, while others combine both approaches.
The problem is, Mister Market doesn’t care. Just ask Alan Greenspan. In December 1996, the former Fed Chairman warned of “irrational exuberance.” Three years later, the Nasdaq 100 was more than three-and-a-half times higher. Six years after that speech, in September 2002, the index bottomed at 832.52 — a bit higher than where it was when he spoke.
The similarities between the dot-com days and now are quite compelling.
No one knows how this ends—whether it runs further, lasts longer or none of the above.
This may be an AI bubble, or it may have further to run. We don’t need to know the exact answer in advance to manage risk. Our job is simpler: we track trends using our systems and adjust our allocations when the evidence changes.
Maybe, as Yogi Berra may or may not have said: It’s like déjà vu, all over again.
In the meantime, if soccer is your thing, enjoy the show.
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