Written by Tyson Ray, FORM Wealth Advisors | CFP®, CEPA®, CIMA®
Let’s be honest. If you’re paying any attention to markets right now, you’ve probably asked yourself some version of this question: Is AI different, or is this just the dot-com bubble wearing a new outfit?
Artificial intelligence is transforming the economy and driving one of the most significant investment themes in decades. The level of investment dollars flowing into AI is staggering. Tech giants are predicted to keep spending on AI innovation in the coming years.
Investors naturally want to know what that means for markets, portfolios, and the future. While every market cycle is different, history often provides valuable insight.
A lesson we can’t afford to forget
Think back to the late 1990s and early 2000s during the Internet bubble, which was the abundance of venture capital and funding for Internet start-ups. Dollars started flowing into the Nasdaq. Many of the start-ups didn’t last, triggering a fall in technology stocks.
You might also remember Y2K. It was the widespread concern that computer systems would fail when calendars rolled from 1999 to 2000. Businesses and consumers invested heavily in upgrading technology to prepare. Then January 1st arrived, the computers worked, and demand for new technology quietly fell off a cliff.
So how does today’s AI moment compare?
The technology boom from that time reminds us that rapid innovation doesn’t always translate into lasting stock market returns.
But there are genuine differences this time around. The companies leading the AI boom are generating substantial revenue and cash flow. That’s a meaningful distinction from 1999, when profitability was often years away. On the other hand, parts of the AI sector have stretched to levels that assume enormous, sustained growth for years to come. And history tells us that’s a high bar to clear.
How we’re moving forward
Regardless of market headlines, FORM continues to focus on preparation. During June, we rebalanced client portfolios based on current research and positioned income portfolios to cover anticipated cash needs for the coming year. While we can’t control markets, interest rates, or geopolitical events, we can prepare for them.
The most important thing clients can do is stay in communication with us. If your spending needs, goals, or circumstances change, let us know. The more we understand what you need from your portfolio, the better we can plan and make thoughtful decisions on your behalf.
