Transcription
So no matter where we turn, everybody seems to think that we are in an AOM style tech bubble. I think that this is a bubble, and I don't use that term lightly. We're now, you know, deeply into bubble territory. We are living through just a massive AI bubble. So eventually, that suggests that there's going to be a reckoning.
What I decided to do for this special episode of Funding Awesome is bring in my good friend, Larry Tentarelli, and talk about whether we are or are not really in an AI bubble. The stock market—your time is valuable, so let's dive right into it.
Larry, I think the first question everyone is going to have is, what the heck qualifies you to tell us if we're in a bubble right now?
Sure. Hello, Alex. Thank you for having me on. I started in the market in 1998, so I'm going on year number 26 now. I was a Series 7 licensed broker with Merrill Lynch from 1998 to 2003, so I actively traded right through the run-up and then the run-down in the NASDAQ 100 back then.
I lived through the dot-com bubble on a professional basis and on a daily basis. I made a lot of money; I lost a lot of money. But what I decided to do after the NASDAQ melted down in 2001 was to really study what happened and commit myself to be sure that that didn't happen to me again. About last May is when I really started to see the bubble talk start to show up on Twitter. There was already talk that it was an AI bubble, it was a tech bubble. I'd say about 90% of the posts that I saw were very bearish.
I've got a subscription-based website—it's a research website called BlueChipDaily.com. Our subscribers include hedge fund managers, portfolio managers, research analysts, financial journalists, and retail investors. Some of our commentary has been featured on CNBC, Barron's, Bloomberg, Reuters, and a few other sources. I've been posting for 11 years; since January 2013, and we've been fortunate to develop a follower base of over 90,000 people. I told people I don't think that this is a bubble whatsoever, and I think that this is going to continue a lot longer than most people think.
And now here we are, 10 months later, and I think the same thing. I don't see a bubble whatsoever based on my prior experience living through the dot-com bubble. We did the research and compiled the hard data, and we're going to compare all of the numbers from that bubble in March 2000 versus all of the numbers today. I think that when your viewers are done with this video, they'll probably come to the same conclusion that there's nothing today that looks anything like the bubble in 2000.
So, we have somebody who's not only lived through it but invested through it on the way up and way down professionally, who has seen all the emotions tied up with the bubble of 2000, and who’s pulled all the cold hard data and compared it then versus now in this NVIDIA AI bubble to see if there really is a pattern here. I'm super excited for it, let's dive right into it.
Here's what I see. We're going to talk about six reasons why we are not in a tech bubble.
So first thing, NASDAQ 100 from 1995 to 2000—over a five-year period it went up 12x. Whoa, yeah, and wait till you see these charts. NASDAQ 100 this five-year period, 2018 to 2024—we're up 3x. So, 3x is a good return, but it's definitely not 12x.
Number two: valuations. The NASDAQ Composite PE in March 2000 was 175. The current NASDAQ PE today is 42. So, if we just look at valuations, the valuation today for the NASDAQ is 76% lower than it was in 2000.
We're going to talk about some parabolic stocks; we're going to look at IPO activity. And then the big comparison that I've heard for over a year now is that a lot of people like to compare NVIDIA to Cisco, and they say that you know NVIDIA today is Cisco back in 2000. Nowhere near close; we're going to go through the math. And then we're going to talk about profitability.
So I want to get started with these charts. I said that not only do I think that this is not a bubble, but I think that this is probably going to go on much longer than most people think because these cycles generally don't end after a few months. It's one thing to have an opinion, but the numbers really tell the story.
So, this is a NASDAQ 100 chart, 1995 to 2000. If we take a look in the bottom left corner, we can see 1995: 3796, so we'll call it 400 for simple math. Over five years we went from 400 to the peak, 4816. This was March 10th of 2000, so from 400 to 4,800—that's a 12x run in five years and three months.
What I wanted to do is take a look at today's NASDAQ 100. Let's take the same five-year look-back period and see how we compare.
So, this is 2018 to 2024. What I want to do, just to be fair, is take the very lowest number that I can find so we can compare the run. So, from 5800 to 17962, that's a 3x run. Now, 3x is nice over five years, but keep in mind 95 to 2000 was a 12x run.
So, huge difference. If we were at the same level today that the bubble top, in 12x, the NASDAQ 100 would need to trade for 70,000 right now.
Yeah, very different from where it is today. Alex, here's another interesting thing: if we take a look at the NASDAQ 100 today, so we're just under 18,000. If we look at the peak in 2021, we can see that the peak in 2021 was 16,764. So we are less than 8% above the highs in 2021, and I just think it's difficult to call something a bubble when it's only 8%, 7% over the prior high. Does that make sense?
That does. And it's also important to understand how much time has passed since that prior high for earnings to catch up to these valuations, right? So, it took well over a year to reach a new high, and in that time, these companies have been growing; they've been adding more to their bottom line; they've been adding more customers.
Right. Apple's making more money; Microsoft is making more money—all these companies are making more money as the prices go up on the NASDAQ 100.
And if we go back to that chart for a second, you can see from 1999 to 2000, this was maybe 15 months—the NASDAQ 100 just more than doubled. So if the prior peak was 2500, you're up at 4,800. I mean, just imagine if the NASDAQ 100 today doubled in a 12-month period. That's what a bubble feels like.
Yeah, completely different. Exactly right.
So, the first viewpoint: 12x versus 3x—we're just really not anywhere close as far as the actual move in the market.
So, the second thing I want to take a look at is valuation. So we're going to compare NASDAQ Composite March 2000 versus the same thing: NASDAQ Composite today. The NASDAQ Composite PE in March 2000 was 175; the current NASDAQ PE today is 42.
So once again, if we're talking apples to apples, we are 1/4 of the valuation in the NASDAQ today versus at the top in 2000.
Just to give you an idea, if we were at the same level, the NASDAQ today would need to be at 64,000, and right now it’s at 16,000.
The NASDAQ 100 would need to be at least four or five times higher than it is today.
Exactly right—four times higher than it is today, right? And by valuations, the P.E., we’re still another factor of four off.
Right, right. So whether we're going by price or by price divided by earnings, so far we are nowhere near the dot-com bubble levels of 2000.
Right, yeah—a big difference here.
Now here's the next point that I wanted to look at because everybody I think by now is familiar with Super Micro (SMCI). It's gone on a really strong run; it's been a very strong stock.
But Alex, here's what I can tell you: in 1998-99, we had 20 Super Micros, and I'll tell you what I mean. This is from The New York Times, and what this shows: this talks about 1999. Qualcomm rose 2,619%—it went 26x just in 1999. And wait till you see some of these charts that I'm going to show you—12 other stocks went up at least 1,000%, and a further seven issues went up at least 900%.
So you had 20 stocks that went up 900% or more in one year. That is massive—it's nuts!
Are these stocks from all over the place, or are these all tech? What kind of stocks?
Okay, they were all tech, and we'll take a look, but they were all tech. They were all internet-related, some type of boom.
But keep in mind, Super Micro today—that's the home run hitter. Super Micro over the past year would barely crack this top 10 lineup.
Okay, so what about the other stocks like NVIDIA and every other stock that people are associating with this so-called AI bubble? So in NVIDIA, over the past year, NVIDIA's up about 245%, so it wouldn't even be close to any of these stocks.
That's an interesting fact. The comments that I see a lot are, "This is an NVIDIA bubble," and sort of what you're saying is NVIDIA doesn't even meet the criteria to have this be called a bubble if we're comparing it to 2000.
Right. NVIDIA really wouldn't even be a blip on the screen back then.
So here’s what I mean by parabolic stocks. This is MicroStrategy, and this is the same MicroStrategy that's still around right now. This stock went 45x in a 12-month period—45x!
So 400% in a 12-month period, correct?
So if you put $1,000 into it in the middle of '99, your investment was worth $45,000 less than a year later. That is insane!
Yeah, if you got lucky and you put 10 grand into it, you had $450,000.
So we’re talking about what Super Micro is going—going 10x. MicroStrategy went 45x. Qualcomm went 4200% in 18 months.
So if we take a look: in '98, October, it was trading at $150 and changed to $65.39 at the peak.
So this is a 4,200% run. Your $1,000 would turn into $42,000 in 18 months.
And Alex, I've got to tell you, I was in these stocks. I used to trade these stocks every single day. Just imagine if you had a stock today that went up 4,200% in an 18-month period.
I can't imagine. Yeah, I'm living in the wrong time, man!
Yeah, listen, the good news is that I had some Qualcomm on the way up; the bad news is I also had some Qualcomm on the way down, and I thought it would be a good idea to buy the dip. Now keep in mind, I just started in the business. I think at the time I was 29 years old, and I didn't really know anything about anything.
When I got started, everything just went up, and we were conditioned just to buy the dip, just buy the dip because it's going to keep going up. So once things started to go down, we just kept buying the dip, and we bought it all the way down, and it cost a lot of money!
Which, by the way, is still largely the message that most retail investors get today.
So I'm glad you're sharing that because that is something that I think is really powerful to hear.
Right. And the best way to get better as an investor is to hear that and understand that you need to adjust your own strategy accordingly.
You know, so I'd love to hear a little bit, maybe for a couple of minutes, just what did you learn since then? What are you doing differently now?
Big, big difference. Great question!
So I started to trade here, made a lot of money, gave it all back. Once you blow up your trading account, which is what I did, I had no more money left to trade.
So this was back in 2002. I took a break from trading for a couple of months, and then I sat down, and I wanted to figure out just where it went wrong.
Because it wasn't just me; it wasn't just the people that I worked with; it was everyone. Merrill Lynch, Janus had a fund called the Janus 20 fund—they might still have it right now. Merrill Lynch rolled out a product called the focus 20. It was 20 tech stocks, you know, Nortel and Cisco, and these things lost 80%, 90% on the dollar.
So it wasn't just new investors; it wasn't just the retail investor. So what I decided to do, I wanted to figure out what could I do again so that I would feel safe investing my money again and not go through the same thing.
I eventually discovered technical trading. I've got a technical process that I follow that I've worked on for the past 22 years now, and I'm very proficient with it. I use moving averages quite a bit, and the key thing is, no matter how good a stock is, if I'm holding a stock and it closes below the 200-day moving average, then I sell the stock.
I can always buy it back if it goes back up. I looked at these charts like Cisco and JDS Uniphase and Intel. What I found is if the only thing that I did was just sell those stocks when they broke the 200-day moving average and I didn't buy anything, that I didn't try to bounce the bottom, I realized if I did that I would have probably saved 50%, 60% of my capital, and that’s why I use right now a 100% technical process.
Sure, no, that’s super interesting.
Yeah, so getting back to the dot-com bubble versus the AI bubble, let's talk about some of these parabolic stocks.
Yeah, let's take a look at today. So I had a quick one—JDS Uniphase. Alex, this was just 38x. I shouldn't even be bringing this one to the table; it only went up 38-fold.
But here’s where we are today. So I took this information from Finviz, and what I wanted to do—to be, because keep in mind, I want to be 100% objective. I don't want to cherry-pick; I want to just take apples to apples.
So I went into the screener, and I went for the low-hanging fruit. So, there are 2,370 stocks in this Finviz database over a $1 billion market cap, so I took stocks that were $1 billion market cap or higher, and I took the top 20 performers. So over the past 12 months, here's the top 20 performers.
So here’s Super Micro, up 1,700% over the trailing 12 months. The only stock that’s ahead of that is a very small biotechnology stock, a $1.4 billion market cap, but keep in mind this stock is up 2,400% over the past year, which means when it started this run it was probably a $50 million or a $60 million stock.
So it was really a micro-cap—yeah, a tiny, very small. But here’s the thing: top 20 stocks—remember in 1999 we had 20 household names, common tech stocks, 20 stocks that were up 900% plus? If we go back right now, we only have two stocks that are up 900% plus, and one of them is a speculative biotech.
And the key thing: if we go back on this list, you'll see that there are seven or eight of these stocks are really biotechs, so it's not really the same apples to apples.
Speculative biotechs versus stocks that were very popular back in the day—that's a great point too. So, basically what you’re saying is for an AI bubble, a lot of the stocks today certainly aren't even AI stocks.
Correct. When I look at these stocks, Super Micro—that's a tech stock that I think we’re all familiar with. GigaCloud Technology—that's a very popular stock; I think it's IBD number one in their top 50.
But then we've got biotech, biotech, Clean Spark in the Bitcoin miners, but that’s up 400%, 500%. Now keep in mind, those are big moves; those are great moves, but these moves are nowhere near 20 stocks up 900% over the past year.
I would say you've got one, you've got Super Micro.
So, so far, the index is one-quarter of the price it would need to be to be a bubble. The index's valuation, so its price-to-earnings is about one-quarter of what it needs to be for it to be a dot-com style bubble.
And for being an AI bubble, there sure aren't a lot of AI stocks that have made big moves at all. And big is relative, because these big moves that we're looking at today are still much smaller, in order of magnitude smaller, in fact, than the moves that many more stocks that were already bigger made during the dot-com bubble.
Do I have all that right so far?
You have it exactly a hundred percent right.
Cool. I'm actually spending a lot of my time just listening and absorbing. I hope that this is as useful for the audience as it is for me because for me—yeah, go ahead.
You know why, and just to take a second, the key reason I wanted to put this together— I have subscribers on my website; I've got a lot of followers on Twitter, and a lot of people reach out to me or they get worried. They're like, "Larry, I'm worried that we're in a bubble."
So what I wanted to do because I know in my head that this right now does not feel like what that bubble felt like back then. That felt like being at the Vegas casino, maybe you know the slot machines.
It was, Alex, stocks would go up 100 points a day if you remember the moves that we had in Super Micro a couple of weeks ago after earnings when it went from like 370 to—
A thousand.
Yeah, we were having those moves for a year and a half in 20, 30, 40 different stocks.
So when I look at Super Micro, I'm like, "Hey, you know, that's a great stock," but we just had that every day. I mean that was just par for the course back then.
It's incredible how different those two environments are, and I'm glad you're pointing that out, right?
Yeah, because in 2000, a large part of my audience, myself included to be honest, we were still in school or at least not in any sort of financial position to be watching the stock market to the point where we're sweating about price action one way or the other, right?
So hearing it from somebody who's been in both places then and now, it's great to hear firsthand.
Yeah, and sometimes I talk to my friends when we talk about the good old days. Keep in mind those stocks would also go down 100 points in a day too, so you really had to learn to manage the volatility. But that's why I really don't get rattled when I see these moves now.
We're going to take a turn to the real speculative froth. This is something that we haven't even seen right now, and I want to talk about the IPO frenzy. This was in 1999, and we're going to look at some big numbers in a minute.
But the average internet IPO ended the year 266% above its offering price compared to non-internet-related IPOs—a gain of 59% at the end of the year. So if you had an internet IPO, on average, you were up 266%. Non-internet IPOs were up 59%, about a 400% greater return if you were internet-related, which is really interesting.
We see parallels like that today, right?
So back then, I imagine if you just changed your name from Company X to Company X.com, right, you saw much bigger multiples, right?
And what we're seeing today—x.com AI instead of x.com—do the same thing, right? Convince investors you're some sort of AI company; they give you a higher multiple.
They had Stamps.com, Pets.com, Webvan.com where they're going to deliver groceries. Basically, this is the IPO frenzy.
This is from a University of Florida study, so what this shows in 1999 there were 446 total IPOs. The average first-day return was just over 70%. If you go back the five years before that, it was right around 16%, 15%, 13%.
Then all of a sudden in '98, 21; in '99, 70%. So your average first-day was up 70%. It gets better.
So this is the slide, but we put this into a spreadsheet format to make it a little bit easier to read.
So the slide just quickly for your viewers—this is from the same University of Florida study, it can be found online—but this shows the top 10 first-day pops. So the top 10 IPOs averaged first day return plus 54% first day.
Wow, first day!
So, and here's the math: VA Linux, the offering price was $30 a share; it closed the first day at $239—up 697%.
And we did some research; I couldn't find any IPOs whatsoever over the past year remotely close to this.
I don't know if you, off the top of your head, know of any.
No, not at all. And I mean now, it's so obvious why there were over 440 IPOs in a single year back then—more than one per market day, right?
Even if you start including things like the Fed’s interest rates—we are not even close to that level of IPO activity today, right?
I couldn't find—we did all the research. The Globe.com at the time—this was the IPO, so 1998. It went up 66% first day, and this was the one that really got everybody's attention. CNBC was doing coverage all the time, Fortune Magazine—everything was a brokerage commercial.
But this was the one, from what I remember, that really started to ring the bell. And then you can see Foundry Networks 525, 57%; Aamai Technology—still is a stock that trades right now—that was up 458%.
But that's the top 10 average first-day return plus 500%.
And Alex, it didn't matter if they had a business plan.
I would venture to say that most of these companies, at the time they came public, weren't profitable.
Were not profitable! From what I can remember, I've never seen anything like it.
I honestly don't think that I will ever see anything like this again. I don’t think we'll see that this time either.
So let’s double-click on that point for a second. You're talking about companies that don't have business plans—companies with low to no earnings. How does that compare to today?
Are we seeing the same sort of thing? For example, stocks with crazy P/E ratios—can you walk us through the comparison then versus now?
Absolutely. So a couple of things: most of these companies didn't have P/E ratios because they didn't have any earnings.
So we're going to go to a company in just a minute, and then we're going to come back to your earnings question because I do have that on a slide.
So what this shows: number of IPOs that doubled on the first day—1997, there were two all year; '98, there were 12 all year. In 1999, 117 IPOs doubled on their first day of trading.
Wow. And if you add the first quarter of 2000, there was another 48.
So if you look on this graphic here, also from the University of Florida—in five quarters, there were 165 IPOs that doubled on their first day.
And I don't think, Alex, I couldn't find one IPO that doubled on the first day in 2023.
Now, it might be out there, and maybe we couldn't find it, but I couldn't find one.
Definitely not 165, for sure.
That is a great point. You know, IPOs today, we're in a different IPO environment than we were in 2000 for sure.
But still, you would expect great companies like, for example, ARM—right? No brainer. At the heart of the AI revolution, especially inside the edge devices, ARM is a major player in AI at the hardware level.
NVIDIA, another one—didn't IPO; but still, we're talking about these companies that are leading the AI revolution not coming anywhere close to these kinds of price moves or multiples, right?
We're not even close. And we're going to take a look in a few minutes—what we did was we went back and we dug up the annual reports for the top 10 companies in the NASDAQ 100 March 10th of 2000 at the top.
And what we did was we charted out what did they do for revenues, what did they do for earnings, and how does that compare with today? And we're going to take a look at that in just a few minutes.
But I wanted to answer your prior question. So this is a headline from CNN, July of 2000, and what this shows—there was a fiber optics company called Corvis. They raised a billion dollars in an IPO, but it says the company managed to obtain a $27.6 billion market cap with no sales.
With no sales?
No sales! So forget about earnings; forget about having earnings— they had no sales. They had two customers that had said they might buy $400 million of equipment from them—might buy over a two-year period.
So this was a company with a $27 billion market cap—no sales!
So when we talk about speculative stocks today, that doesn't even come close to the type of speculation people were doing in 2000, right?
Like, I have two, maybe, customers right now, and I certainly am not valued at $27 billion!
Right! Here’s what it was: what Wall Street figured out was that everybody wanted these stocks. So when I was a broker at Merrill Lynch, the way it worked is—Merrill Lynch, and this is all brokerage firms everywhere—they would get allocated so many shares, so many IPO shares.
You'd let your best customers get these IPO shares because let’s say I’m your broker, and you’re a big client of mine, and I put the Globe.com—you know, we buy some Globe.com at the IPO, and it's up 600% on the first day. You're going to do business with me probably forever.
And it didn't matter to anyone that these companies didn't have earnings; it didn't matter that they didn't have sales because everyone was just making so much money that they just wanted to get public as fast as possible.
Which is very different from what we're even seeing today, right?
Everybody’s being super cautious about going public.
If we get to a phase where you start to see a bunch of startups start to come public and they've got AI in their name, where AI is their business plan—the way that a real bubble works is you need to get that IPO frenzy, and we haven't seen it yet.
I’m sure that we will at some point, but we just haven't seen anything even close to it.
Sure. And you know, we spent a lot of time talking about IPOs, but don't forget that’s just one point out of four so far, right?
Right! The index pricing, the index—the index's price-to-earnings or its multiple we’ve talked about, specific stocks going parabolic then versus now—what parabolic means and what kind of stocks are going parabolic, right?
And now IPOs, right?
So I'm hoping we can cover what I get as the most biggest comparison next, which is NVIDIA versus Cisco, right?
Yes, yes! And you know, it’s one thing to talk about companies that are gone that didn’t make any money—let's talk about the heavyweights; let’s talk about the backbone of the current stock market.
And obviously, we've heard the NVIDIA versus Cisco comparisons.
So we did some math, and here’s what we found out: NVIDIA, for fiscal year 2024, which just ended, their net income was $29.7 billion.
So over the past 12 months, they put $29.7 billion to the bottom line. If we look at Cisco, their best year, fiscal year 2000, they put to the bottom line $2.6 billion.
So NVIDIA last year, that we just came out of made 11 times more net income than Cisco did in their best year.
But here’s the best part: last quarter, NVIDIA made more money in 20 days last quarter than Cisco made the entire year, fiscal year 2000 at the very top.
So even accounting for inflation, these companies are incomparable—not even close!
And that's a good point because Cisco at one time was the biggest stock in the market. They had over a $500 billion market cap at their peak.
But Cisco's PE at the very top was 196. A $500+ billion market cap made $2.5 billion.
If NVIDIA today traded at the same PE—196—that Cisco had at their top, NVIDIA would be a $5.8 trillion market cap, or it would be about twice as big as what Microsoft is right now.
That is insane! And honestly, only about three times bigger than it is today, which is really funny. But it would be nearly a $6 trillion company, correct?
Right, that's as high as some valuations have gotten. We haven't really seen anything like that.
In fact, companies are just starting to crack the $3 trillion mark for the first time!
Yes! So, here’s the key thing: NVIDIA's PE today is actually lower than when it started this run. People talk about NVIDIA as a bubble.
So we took this from Finviz, and I want to take a look at the metrics. What this shows is that for the past 12 months, NVIDIA's stock is up 23.47%. Trailing 12 months, up 230%.
But earnings per share is up 764%.
And then this is for the entire year—so the entire year of '23 versus fiscal year '24 is up 586%.
So the key thing is that the stock price has not gone up anywhere near as fast as the earnings growth.
That's right! And what you would see in a real bubble would be actually the opposite, where let's say maybe the earnings went up 40% and the stock goes up 200%.
Do you see what I mean?
Yeah, we would expect higher multiples if this is a bubble, right?
And we don't know what's going to happen in five years; we don't know what's going to happen really in five days.
But when they look at what the growth is for the company right now—what their market is—they've got gross margins of 72%, is what it shows here—just huge, huge numbers.
So for NVIDIA to be up 230% over the past year, but sales and earnings are up 265%, 764%, it’s to me, that doesn’t look unfairly valued.
Yeah, their multiple is actually shrinking, if anything, right?
Their PE, like you were saying earlier, is lower today than it was at the start of this run, right?
I’ve never—I’ve got to tell you this. NVIDIA is the number three market cap stock in the market—1.9 trillion.
I've never seen a company anywhere even close to the size of NVIDIA that has put up these numbers as fast as they have.
I think it's got to be a record for a company that's this big to have grown their sales and their earnings so fast because keep in mind, they did 60 billion in sales, but they put almost half of it to the bottom line.
That's an unbelievably high number!
They're printing cash!
Give myself a single pat on the back here—this is why it's so important to understand the science behind the stocks.
Because if you were watching my channel 18 months ago, you saw this from the technology side before it hit their balance sheet when we were talking about NVIDIA's undisrupted moat—the way they are the kings of parallel computing and how the AI revolution is going to be powered by GPUs and accelerators.
Now we’re just seeing it in the bottom line; it's great to come full circle and see this for sure.
Yeah, really! It's just a great job on your part!
That's how you and I connected because I was watching your videos, and I said, "Wow, this guy has the best videos, the most detailed videos that I've seen."
But in the year 2000, it was about the promise of profitability.
If we take a look at Cisco, and we dug up their annual report—so this is fiscal year 2000—they did $18 billion in sales, but they only put to the bottom line $2.6 billion.
So if we compare apples to apples, NVIDIA just put 11 times more to the bottom line.
Now, Cisco was not even the top-earning stock, so in 2000, what we saw was price over earnings skyrocketing.
P.E. went way up. What we're seeing with NVIDIA is E is going way up, and price is following it, right?
So the price-to-earnings ratio is staying roughly the same, if not getting smaller because earnings are going up.
Their margins are high; they're making a lot more actual money and getting it to the bottom line. That’s why their valuation is climbing so fast, correct?
Yes, they’re—the earnings for NVIDIA have gone up much faster than the stock price has, and that's why the stock is moving so much.
What we did was we went back, and I've got the data for this—we'll look at that in a second. The NASDAQ 100— the top 10 stocks at the very peak, March 10th of 2000.
So you're going to see some interesting names: Microsoft, Cisco Systems, Intel, Oracle, Sun Microsystems—now gone—Dell is still here, Qualcomm, Yahoo, Applied Materials, and JDS Uniphase.
Versus our top 10 today: Microsoft, and this is as of yesterday: Microsoft, Apple, NVIDIA, Amazon, Alphabet, Meta, Tesla, Broadcom, ASML, and AMD.
But here’s the key thing: in 2000, if you look at the top 10 stocks, the number one company for revenue was actually Intel—$33 billion in revenue—which is a very good number.
If you look at the current number three, right, that’s NVIDIA—$60 billion and $29.7 billion.
But if you add up the top 10 in March 2000, the top 10 in the NASDAQ 100 total revenues: $148 billion.
But if we add up the top 10 total revenues today, it's $1.8 trillion.
The revenue news for our current NASDAQ top 10 is 12 times greater than what the revenues were in 2000.
But the price of the NASDAQ 100 itself is only up 370%.
So yeah, like you said, the price has not gone up as fast as the sales have, which means basically if we were in a bubble, we would expect the price to be four times higher.
Right! If we were in a comparable bubble, we would expect the price of the NASDAQ 100 to be a lot higher.
And here’s another key point, and there are so many.
One of the biggest differences that I see today is in the year 2000 these companies like Cisco, Oracle, and Sun Microsystems—all of these companies that are in this group—they were selling, you know, all those IPOs that we talked about that went up 600%, and they didn’t make any money.
Well, those were the customers of Cisco and Intel and Oracle. They were selling to, you know, the Globe.com. They were selling to VA Linux. That was their customer base.
Their best customers were companies that really weren't very well capitalized. They had a lot of venture capital money, but they didn't have a lot of sales.
So the problem what happened at the top here was Cisco Systems—they loaded up on all this telecom equipment, and then guess what happened?
Their best customers went out of business.
What we've got right now, when you look at the quality of these companies: Microsoft made $82 billion last year; Apple, $100 billion; Meta, $39 billion.
So some of the biggest customers for NVIDIA's GPUs—Meta is one of their biggest customers. Tesla is one of their biggest customers.
Look at the financial stability: Meta made $39 billion over the past 12 months. Guess what? Meta is not going out of business!
So the difference today is the customers for these GPUs are some of the highest quality companies in the world. Back in 2000, a lot of these companies that were buying the gear from Cisco and Sun Microsystems—these were upstart companies that didn't have any real capital.
That’s such a great point! It's not just the quality of earnings; it's the quality of customers too.
I'm going to steal that and use that in tons of videos because, yeah, I mean Jensen was meeting with government officials.
So there's a thing right now called Sovereign AI where entire countries have made the decision that they have to build out an AI network right away.
If we look at the news yesterday, Apple decided to scrap their EV business, and they're shifting a lot of those people to generative AI.
But when you're talking about Apple making a major commitment to it, when you've got entire countries that have committed to build out these AI systems—Alex, they’ve got unlimited money!
It makes sense! Technologists talk about generative AI as if it's the next phase of the internet, yes?
Right? So can you imagine being a country and saying, "Nah, we're not participating in the next phase of the internet?"
This is not a bubble from a technology point at all. It’s the next chapter in the saga of computing.
And what we're seeing is governments catching on. Giant companies like Apple catching on.
And there’s only one company right now really providing the heart of that infrastructure.
Yeah, and it’s NVIDIA. And the difference between then and now is Cisco was sort of providing it to anybody that said they would want it, whether they could afford it or not, right?
NVIDIA charges $40,000 per GPU. They have an insane premium because they don't have any competition.
Right, and people are paying that! If I'm buying a $40,000 GPU, it's because I think I can make more than $40,000 on it!
Look at the problems that Google's having right now—Alphabet's having because of their struggles with Gemini and with Bard.
And you know, they’ve had problems since day one with Bard giving out bad information.
Now they've got problems with Gemini, and Alphabet right now—I mean, the stock price shows it; the CEO is under a lot of pressure.
And this is just one company because they haven't gotten AI right.
Yeah, to your point, look what it’s costing them! And they’re not building that hardware themselves either—they’re buying it from NVIDIA.
And here’s the thing, because Apple’s a great example.
I think Tim Cook's announcement came at the right time yesterday. Here’s what it is: Apple thought that they wanted to get into the electric vehicle business.
The EV business is not their core competency; it’s electronic devices.
So when it comes to GPUs, you know, AMD—they’ve got a product that’s going to do, I think it’s expected to do about 5% of the sales of what NVIDIA does.
There’s talk that Microsoft wants to make their own GPUs, and Meta might make their own GPUs.
But keep in mind, it’s such a huge barrier to entry. NVIDIA has such a technological lead that, guess what—just like Apple figured out that they probably weren’t best served to try to make electric vehicles, you know, Meta is probably not best served to try to figure out how to make a GPU that’s going to compete with NVIDIA.
Because guess what? It's just not going to happen!
Who's going to beat NVIDIA at their own game?
I don't know! That’s right!
And it’s not about competing with NVIDIA today; it's about catching NVIDIA overall in the race!
So there’s no question that Google, Microsoft, Meta could eventually make a GPU as good as what NVIDIA has today.
The question is, by the time they're able to do that, how good will NVIDIA's current GPUs be?
Right! Just like we don't expect that NVIDIA is about to turn around and make the next Facebook or Instagram tomorrow.
Or, I mean, what would it say if NVIDIA wanted to try to make an iPhone?
Yeah! We would be saying the same thing about NVIDIA. There’s no way they’re going to catch Apple!
There’s no doubt they could make an iPhone, right? But by the time they come out with it, how good will Apple’s actual iPhone be?
It's the same thing here.
I just don't see anything.
And when I go on Twitter, someone will come in and say, "Oh, you know, this is a bubble." I’ll ask them, “What actual data are you looking at today where you could compare today’s market to 2000 and say it's a bubble?”
I want to be open-minded because, as I said, I've got a subscriber base, and they rely on me for objective information.
And if it's good, it’s good; if it’s bad, it’s bad. But I need to tell them the actual facts that I see based on my experience, and that’s what I’m sharing with you tonight.
I have the same thing here, and it really keeps me up at night because the more comments I get, the higher prices go, the more comments I get that we’re in a bubble, and the more I stare at my ceiling late at night and worry, are my convictions wrong when I talk about companies like NVIDIA and Qualcomm?
And a lot of the same companies, like Microsoft and Qualcomm, that were even around during the tech and telecom bubble.
And here’s the thing, and I want to be very clear for you and for your viewers: I’m not saying that these stocks can’t go down; I’m not saying that the NASDAQ can’t go down. Anything can happen to make stocks go down at any time.
But what—I just want to look at—is this a bubble based on the definition of what we saw in the year 2000?
And I don't think that there's any number that even compares to it, sure.
And you know, just like stocks can go up 40, 50%, a couple hundred percent and it's not a bubble—stocks can go down 10, 20, 30, 40% and not be a bubble popping.
Right, exactly!
So a little bit of nuance goes a long way here, right?
And I lived through it. You know how you talk about staying up at night? I used to stay up at night every night because back then in '99, 2000—listen, I remember one day I was on margin; I was in this stock called Ulex, which was a big day trader stock back then, and there was like a false report that I think they had missed earnings or accounting fraud.
The stock was down like 40% pre-market, and I was on margin. I think I lost like three months’ salary just that morning, and I was like physically sick.
I know the feelings that you have. The one thing that I'll say: the people that I've talked to that are calling this a bubble weren't trading in the markets back then.
Because the people that I do talk to that were trading back then, they don’t call this a bubble.
But we did our own research, so when we were comparing the stocks back in March of 2000, I had the research team literally go—you can see this is from Intel's website—we literally went to every company's website and pulled up their actual numbers.
So when I discuss these numbers with you, we didn't just take this off Google; we actually did the legwork and pulled the numbers ourselves.
And that, by the way, doing that is super important.
You know, we have a small research team for Tier Symbol U; we do the exact same thing. We start from the bottom up; we go directly to the source, right?
And we put together our own ideas about what is going on with the technology of these companies, how defensible that technology is, and how we expect that defensible technology to turn into profits and ultimately affect their bottom line and return money to shareholders.
So when we get it wrong, it’s because we got it wrong. But when we get it right, it’s because we got it right.
And so that’s important for a lot of reasons—one of which is just having another independent data point to come to your own conclusions.
Yeah, so why don’t we quickly summarize everything that we’ve covered so far? Because it has been a lot.
It has been!
So quickly, we looked at the charts: in 2000, the NASDAQ 100 went 12x over five years.
Today, it's gone 3x—so 1/4 of the move! The PE at the peak was 175; the PE today is 42—once again, 1/4 of the valuation.
When we talk about parabolic stocks, there were 20 stocks that went up by 900% or more.
And we looked at MicroStrategy and Qualcomm—up 42x and 45x—whereas the closest we’ve got right now is Super Micro. I do think Super Micro is up about 17x off the dead lows.
And that's the number one stock, but it's nowhere near the 45x or the 42x, and it’s nowhere near 20 of these stocks up over 900%.
Yeah, would almost have to triple again to those levels, right?
That’s absolutely correct! So we talked about the IPO activity—this was just really the biggest thing.
These companies came public so fast; they ordered all this gear—Cisco made all this gear. Then the companies went out of business, and then Cisco was stuck with all the gear.
Same thing with Sun Microsystems.
We talked about NVIDIA versus Cisco, and the key thing is that if NVIDIA traded at Cisco's peak P/E, then NVIDIA would be a $5.8 trillion market cap, which would equate in stock price to about $2,300 a share for NVIDIA.
Yeah, that's insane!
And we also covered, by the way, that it's not just NVIDIA’s earnings that are climbing like crazy—they’re also incredibly high quality because the companies that are buying from them—Meta, Google, Microsoft, Tesla, Amazon—right?
These companies not only are not going out of business tomorrow—they're some of the best companies on the planet! They plan to take these infrastructure investments and eventually turn a profit with them.
Exactly!
And then we looked at the profitability, and basically, this isn't like in '99 and 2000 where everything was going to be dot-com, and the companies didn't have any money.
Shareholders are looking for cash flow! Meta just announced that they're going to start to pay a dividend. I think Salesforce announced tonight that they're going to start to pay a dividend.
And the key thing is that these companies right now, those leaders of the NASDAQ 100 today, are cash-rich.
And it’s just a totally different environment than what we saw in 2000!
Yeah! This is definitely the kind of research that I love seeing. I love sharing. This is the kind of research that I think can really change people's lives.
I'm so happy you came on and you shared all this with us, Alex. Thank you so much!
I'm glad that you invited me on. I think it's a really important message that you and I had to discuss tonight, and I'm glad that we were able to get together!
Yeah, likewise! You want to tell us where we can find you?
Sure! So my Twitter ID is also the same as my website: Blue Chip Daily. So, Twitter is @BlueChipDaily, and my website also is bluechipdaily.com.
And if you visit our website, you'll see some of our technical analysis going back about five years now.
That's awesome! Well, you definitely got a subscriber in me, and I'm sure we'll be working together in the future.
And with that, until next time, this is Ticker Symbol U. My name is Alex, and I'm joined by Larry, and we're reminding you that the best investment you can make is in you.