Will AI repeat the dot-com bubble of the 1990s?

Market Questions[Taogu Ba]
On Friday, the AI sector continued to push higher, and in the evening, US stocks also surged significantly. Undoubtedly, this is a carnival of the AI bull market, with all funds flocking into AI. So, is this year’s AI a replay of the internet bubble of the 1990s?
Comparison with the Bubble
The current AI craze and the internet bubble of the 1990s are indeed remarkably similar in market sentiment and narrative-driven aspects. But in the most core fundamental—company performance support—there are differences:
Performance Differences
First, most of the internet bubble in the 1990s was driven by capital speculation and concept gambling without performance support. Now, AI has strong performance backing on the hardware side, with leading companies entering the performance realization phase. However, on the application side, there are not yet good realization channels, so the current risk lies in whether the application can be profitable; otherwise, it’s just a foundationless gamble.
Capital Support
Second, the funding for network construction in the 1990s mainly came from high-leverage external financing, whereas today’s AI arms race is mainly supported by the self-owned cash flow of tech giants like Google, Microsoft, and Amazon. Their balance sheets are very healthy. From this perspective, even if AI begins to peak, it won’t be as catastrophic as the internet bubble.
Market Characteristics
Although the current AI market has already seen enormous gains, no one dares to short easily because only AI is rising. The stock market no longer responds logically to economic data like employment reports or consumer confidence. The only driving force behind rising stock prices is that they keep going up; everyone is discussing AI, and all incremental funds are flowing into AI.
Factors Leading to a Top
Therefore, the peak of AI should be triggered by a contraction in investments from US giants or delays in application deployment. Similar to the current discussions about charging for Doubao, AI’s transformation still remains a hidden risk. I believe that if AI accelerates further, there could be a significant pullback. We are still in a frantic acceleration cycle, but I am now contemplating these issues.
Market Strategy
Back to the market, what can be observed are still those high-flying AI stocks. All funds can only play in these high-flyers. If you don’t join, you’re a fool. Everyone is being pushed onto this AI train. When to get off depends on my response. It’s advisable to watch for signals like two consecutive days without new highs or widespread decline of mid-cap stocks within the sector. Currently, the most scarce materials include indium phosphide, electronic fabric, Faraday rotation plates, optical chips, and copper foil. The first wave was CPO, and now the second wave is materials. So, it’s still necessary to keep an eye on this main line. Key leaders include Honghe Technology, Fuxin Technology, Tongguan Copper Foil, Roman Shares, Litong Electronics, Hangdian Shares, Changguang Huaxin, Guangxun Technology, and Dapu Micro. These will continue to strengthen the strong. It’s not easy to call a top now. Pay attention to opportunities for low-cost entry, and also consider high-flyers still in accumulation with slightly lower risk, such as Dongshan Precision, Zhonghe Technology, Tiantong Shares, Zhuyi Group, Huashengchang. Most of these are trend leaders. For continuous board sentiment stocks, watch Titan Shares, Zhijing Technology, Datang Power, and Hongban Technology. These have already accelerated and are not easy to chase. Look for divergence and rebound opportunities for trial.
Focus on Main Line
I’m not very interested in other sectors like aerospace and robotics; chasing highs easily leads to losses. Focus on main line opportunities. Tomorrow, you can first observe whether indium phosphide shows signs of strengthening.
Strategy
Friday’s strategy: early intervention in Titan Shares and Zhuolang Intelligent, both hitting the daily limit; GCL Energy Science and Technology exited; China Great Wall halved; hold positions in Honghe Technology.
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