Friday, 21 November 2025 Reading time : 4 minutes

Nvidia's surprisingly strong quarterly results fail to dispel concerns about an artificial intelligence (AI) bubble for the time being. At least, that is what the initial reaction of the stock market to the earnings report suggests. On Thursday, Nvidia shares lost more than 3%, while the Nasdaq Composite technology index fell 2.2%.
 
Not only did the US tech giant exceed its ambitious revenue and profit expectations in the past quarter, but the company also issued a higher-than-expected revenue forecast for the final quarter. Initially, the US stock markets reacted with significant gains, but by the close of trading, concerns about an excess in the AI sector once again dominated.

So the question remains: is the current AI euphoria the beginning of a real revolution, or are we seeing a repeat of the dot-com bubble that caught many investors off guard 25 years ago?

Growth fantasies drive share prices
The parallels with the dot-com bubble of the late 1990s are obvious. Back then, enthusiasm for the groundbreaking technology of the internet fuelled a wave of investment and speculative valuations. Today, there is hope that AI will boost productivity across almost all sectors of the economy and enable entirely new business models. This euphoria is reflected in share prices: companies such as Nvidia, considered pioneers in AI development, have recorded enormous gains, much like dot-com companies at the turn of the millennium.

The strong concentration of market capitalisation in a few technology giants is also reminiscent of the 1990s. While five of the ten largest US companies in 1999 were part of the technology sector, today they account for eight out of ten. Furthermore, the share of the ten largest companies in the S&P 500 is significantly higher, at 40%, than during the dot-com bubble. 

AI technology already widely used
However, there are also significant differences that suggest the current situation is less speculative than 25 years ago. These include the fundamentals of today's technology companies. While many dot-com companies generated little profit yet were valued highly, today's valuations are based on much more solid financial foundations. The average price-earnings ratio (P/E) of the Magnificent Seven is around 28, significantly lower than that of leading tech companies in 1999 (P/E 82).
 
Furthermore, today's technology is much more advanced and deeply integrated into the economy. While many internet companies in the 1990s lacked viable business models, AI technologies are already being used in numerous industries today, including automation, medical research and entertainment. Companies such as Nvidia and Alphabet are generating significant profits from AI applications, pointing to a more stable foundation.

Risk of price corrections
Despite the differences from the dot-com bubble, there are still risks today that investors should not underestimate. For example, enormous investments are needed to build the infrastructure for AI applications. According to Morgan Stanley estimates, the expansion of data centres alone will require almost USD 3 trillion worldwide by 2028. These massive investments could lead to overcapacity and misallocation of capital in the short-term – a scenario also seen during the dot-com bubble.

There is also a risk that the high expectations for AI's growth potential will not be met as quickly as the markets are currently anticipating. However, at the current valuation level, the potential for disappointment is likely to be limited, so investors should be prepared for price corrections.

Reverse Convertibles on US Technology Stocks
10.00% p.a. BRC on Alphabet, Meta Platforms, Amazon
Barriere: 50%
Valor: 149 283 350

16.75% p.a BRC on Broadcom, Nvidia, Qualcomm
Barriere: 54%
Valor: 149 283 540

Indicative terms

 

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