How Investor Strategies Today Differ from the Dot-Com Era

After a quarter-century since the dot-com bubble, which captivated and then crashed the market, AI is the latest craze stirring investor interest.

Ben Snider, an executive at Goldman Sachs who is soon to take over its US equity operations, highlights a shift in investor focus in a recent podcast discussion.

In contrast to the late 1990s, when investors speculated on the future profits and economic impact of internet technologies, today's market participants are concentrating on achieving short-term, measurable financial gains rather than banking on AI's distant potential, Snider suggests.

A Focus on Concrete Returns

Reflecting on past experiences, Snider explains that investors have learned the challenges posed by overly optimistic predictions from the dot-com trends.

Currently, the stock market is zoning in on sectors like semiconductors, large-scale computing facilitators, and energy suppliers, looking for substantial earnings now.

Reduced Speculation

According to Snider, speculative trading has decreased compared to the height of the dot-com era.

To quantify this trend, Goldman Sachs created a Speculative Trading Indicator, assessing trade volume involving loss-making or highly valued stocks.

The analysis reveals current speculative levels are much lower than during the dot-com era and even recent years like 2021.

Snider comments that recent market trends, often labeled as a bubble, display uncommon restraint compared to past episodes.

AI's Limited Economic Impact

Goldman's top economist, Jan Hatzius, also shared insights during the podcast, particularly cautioning AI proponents about its potential economic contributions.

Despite the surge in tech stock values, Hatzius notes that AI's influence on US economic growth is minimal, nearing insignificance by 2025.

He clarifies that significant investments in AI are largely imported, and semiconductor roles are intermediate rather than direct capital investments.

When evaluating AI's effect on GDP figures, results show only a slight contribution over recent years, barely improving last year, Hatzius adds.