What does tech today have in common with the early 2000's market environment?
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It’s hard to remember a time when phones didn’t give instant answers and access to information wasn’t at our fingertips. Today, the term artificial intelligence continues to echo as it transforms the world faster than anyone could have ever imagined, but this isn’t the first time the market has reacted to digital screens. Before the AI boom, there was the dotcom bubble. Starting in January 1995 and peaking in March of 2000, the NASD surged over 500% until its catastrophic crash in 2002. We want to open with the fact that markets by no mean are signaling a “bubble” of the early 2000’s magnitude. However, the rapid adoption of the technology and sometimes euphoric swings around AI related news does pose interesting questions about the similarities of markets roughly two and a half decades later. Declaring the start of the AI Boom with the release of Open AI’s Chat GPT in November 2022, we are now hallway through the 63 month run of the dotcom bubble. Although it’s still too early to definitively say AI is in a bubble, the return profile is starting to look familiar and raises the question of just how loud this boom could be.
When comparing the dotcom bubble to today’s tech sector, 1995 maintains the high for the ^BPECTECH at 88%. Said plainly, nearly 9 out of every 10 stocks in the sector were on a buy signal at the start of the dotcom era, tapering off as participation waned and markets collapsed. In comparison, current readings have recently touched 54%, signaling just over half of technology stocks sit on PnF buy signals… well off “dotcom bubble” readings. All this to say, while the return pattern above looks similar, we haven’t seen an “unreasonable” uptick in participation over the course of our “AI Boom”… a positive sign despite the similar return stream detailed above.
Artificial intelligence representative AIQ is currently up 13% YTD and recently hit a new all-time high of $44. The default chart is extended on a column of 23 Xs, so we will utilize a more sensitive $.25 scale to better capture relevant support and resistance points (below.) Much like the rest of the market, things are a bit frothy here so some normalization could be seen in the near-term. That said, with a strong fund score of 5.66, relative strength buy signal against the market since 2024, the technical picture remains quite strong. Since the beginning of our defined “AI boom” (Nov 2022) AIQ has gained roughly 101%. We highlight important support points to watch below.
Today, many stocks feel like an investment in AI, and while much of the tech sector trades in heavily overbought territory, there are a handful of names you could look towards. TRI stands out with a sound technical setup, achieving a technical attribute score of 5 and ranking 148th in the top 500 Large Cap matrix. The stock has demonstrated long-term relative strength vs the market (SPXEWI) since 2023 and against its peer group (DWABUSI) since 2022. Having now sat in a positive trend for two years with three consecutive buy signals on its default chart, TRI recently hit all time highs on 7/8 and maintains support at $192 and $182. Those seeking exposure should note expected earnings on 7/31.
