The AI rally looks like the dot-com bubble. The companies do not.

The Shiller CAPE ratio stands at 38-40, the second-highest in 155 years behind only the dot-com peak of 44.19, and S&P 500 top-10 concentration exceeds dot-com levels by nearly 50%. But AI companies are massively profitable unlike their dot-com predecessors, with Nvidia alone earning $120 billion in net income and the tech sector trading at 30x forward earnings versus 50x at the 2000 peak. The resolution depends on whether $660-690 billion in annual hyperscaler capex generates returns that justify the investment, a question that cannot be answered until the infrastructure cycle produces results.

The Shiller cyclically adjusted price-to-earnings ratio for the S&P 500 stands at approximately 38 to 40, depending on the day you check. In 155 years of recorded data, the CAPE has been higher exactly once: March 2000, when it reached 44.19, one month before the Nasdaq began a decline that would erase 78% of its ...