• The sharp rise in AI-related technology stocks over the past year has brought back old memories of the 1999 dot-com bubble.

• Some investors warn that the stock market today shows similarities to those that existed immediately before the dot-com crash.

• But the three charts below suggest that today’s stock market is a long way from the bubble that formed 25 years ago.

Increasing market concentration, a new technology narrative and excessive valuations give some investors the impression that today’s stock market is operating in the same way as it did during the dot-com bubble of 1999.

An artificial intelligence-fueled rally has driven up the stock prices of technology companies over the past year and a half, with the Nasdaq 100 rising 70% to new record highs. The promise of AI in boosting corporate profits is reminiscent of the promise of the internet in its early stages of adoption.

The ten largest holdings in the S&P 500 now account for about 30 percent of the entire index, representing the highest market concentration since the early 1970s.

But if today’s stock market is indeed in a bubble, it would have much more room to move up on a relative price-performance basis if it could compete with the Internet bubble of the 1990s.

These three charts show why today’s stock market has not yet reached extremes compared to the dot-com bubble of 1999.

1. Rolling returns are in the 10-year range

In the 1990s, the Nasdaq 100 was a real hit. Here are the annual returns for the second half of the decade:

1995: 42.54%
1996: 42.54%
1997: 20.63%
1998: 85.30%
1999: 101.95%

Those gains drove a four-year rolling return of nearly 700% at the height of the dot-com bubble. Today, the Nasdaq 100 has a four-year rolling return of about 100%, roughly the same level since 2013. If today’s stock market is in a bubble like the one in the 1990s, it would have to rise parabolically to match the Nasdaq 100’s price returns.

2. The three-month rate of change is not extreme

This chart from Dean Christians, senior research analyst at Sentiment Trader, shows that the three-month rate of change in semiconductor stocks is relatively low compared to the peak of the dot-com bubble.

Back then, the three-month change rate was an incredible 257%. Today, the change rate is only 45%.

“Can it get any more extreme? Anything is possible.” Christians said.

3. The flagship of the bubble: Cisco vs. Nvidia

Cisco was long considered a prime example of the dot-com bubble; as a result of investor hysteria, the company’s share price rose by 4,105 percent from the beginning of 1995 to its peak in March 2000.

Nvidia is widely regarded by investors as a prime example of the current rally in the stock markets; the value of the semiconductor company has risen to almost $2 trillion.

The story continues

But according to Fundstrat analyst Matt Cerminaro, Nvidia’s stock would have to triple in value over the next year to keep up with the Cisco bubble. Cerminaro has created a chart comparing Nvidia’s share price today with Cisco’s during the dotcom bubble.

“Nvidia needs to triple its value in 433 days to reach the level of a dotcom bubble,” said Cerminaro.

Read the original article on Business Insider