Is the Stock Market Repeating History? What 1999 Can Teach Us About Today’s AI Boom

The New Tech Boom: Déjà Vu for Investors

Lately, I’ve been hearing the same question over and over again: Are we walking into another bubble — this time driven by AI?

We’ve seen the S&P 500 rocket to all-time highs thanks to hype around artificial intelligence and the so-called Magnificent 7 — Apple, Amazon, Microsoft, Meta, Nvidia, Tesla, and Google. But if we step away from CNBC headlines and take a Buffett-style rational look, the picture starts to look eerily familiar.

The market today looks a lot like 1999 — right before the NASDAQ collapsed nearly 80%.

1999 All Over Again

Back in the late ’90s, investors were convinced the internet would change everything — and they were right. The problem wasn’t the technology; it was the timing and the speculation.

People threw money at anything ending in “.com.” Companies like Pets.com, Webvan, and eToys exploded — not because they were profitable, but because investors were buying hype instead of fundamentals.

Fast-forward to today: replace “.com” with “AI,” and the story sounds familiar.

Artificial intelligence might be even more transformative than the internet, but that doesn’t mean every company talking about it will win. The Magnificent 7 are being priced as if they’re guaranteed to dominate the AI future — but history tells us that’s rarely how revolutions unfold.

Valuations: The Numbers Behind the Hype

Let’s talk numbers. In 1999, Yahoo traded at an astronomical 11,000 P/E. Today’s valuations aren’t that insane, but they’re still steep:

• Meta and Google: ~27 P/E

• Amazon: 34 P/E

• Microsoft: 37 P/E

• Apple: 38 P/E

• Nvidia: 52 P/E

• Tesla: a jaw-dropping 250 P/E

These P/E ratios imply huge growth expectations. For example, Nvidia’s valuation assumes it can grow about 26% annually for a decade — doubling three times in 10 years. That’s breathtaking. Tesla’s valuation implies something closer to 125% per year — every year.

Are those numbers realistic? Maybe for a while. But as Rule #1 Investors, we know valuation matters. When price races far ahead of value, gravity eventually takes over.

Buffett’s Lesson: The Car Analogy

Before the dot-com crash, Warren Buffett compared the internet boom to the automobile revolution of the early 1900s.

Everyone knew the car would change the world. Yet, out of hundreds of auto companies, only three survived long-term — and two of those went bankrupt in 2008.

Buffett’s point still stands: you can spot a transformational trend a mile away, but predicting the winners is speculation, not investing.

AI: Too Early for a Rule #1 Bet

So where does that leave us?

Today, only one company — Nvidia — is clearly making money from AI, selling the GPUs that power everyone else’s models. They’re the “picks and shovels” of the gold rush, like Levi Strauss in 1849.

But even that advantage might not last. The rest of the Magnificent 7 are burning through billions trying to find an edge:

• Microsoft is pouring capital into OpenAI.

• Google risks cannibalizing its ad business.

• Tesla keeps promising full self-driving.

• Amazon and Meta are building data-center empires.

• Apple seems unsure where it fits in the AI landscape.

Meanwhile, large language models like ChatGPT, Gemini, and Grok may eventually become interchangeable commodities — meaning there might not be a clear winner at all.

It’s simply too early to make a confident, Rule #1-style bet here.

The Rule #1 Approach: Patience and Discipline

When we don’t know who the winners will be, the answer is simple: Don’t gamble. Don’t chase. Don’t buy into hype.

Rule #1 Investors buy wonderful companies at wonderful prices. We look for businesses we deeply understand — those with a durable moat, a trusted management team, and a solid margin of safety.

And just as importantly, we’re patient.

Buffett is sitting on $350 billion in cash for a reason. He’s waiting. I’m sitting on cash too — because when the market finally comes down, we’ll be ready to pounce.

History Always Rhymes

In 1999–2000, when the tech bubble burst, it brought the entire market down with it. But in the wreckage were incredible bargains.

Apple fell from a split-adjusted $112 to $26. A $10,000 investment at that low point is now worth nearly $9.8 million.

That’s 32% compounded annually for 25 years.

That’s why we wait.

Because when this current AI-driven mania cools off — and it will — we’ll see once-in-a-generation opportunities again.

Final Thoughts: Stay Rational, Stay Ready

Stay rational. Stay patient. Keep cash ready.

If history repeats itself — and it often does — the next crash could be your chance to buy the next Apple or Microsoft at a discount.

That’s what Rule #1 Investing is all about: don’t lose money — and wait for the market to hand you wonderful companies at bargain prices.

And if you’d like to learn how to find those opportunities and value them properly, join me at our next free 3-Day Rule #1 Investing Workshop. It’s all online — no sales pitch, just education, straight from the Warren Buffett playbook.