The eerie parallels between AI mania and the dot-com bubble [View all]

Is it karma? Coincidence? Either way, the ghost of the dot-com bubble is back 25 years later.

Shares in Cisco Systems, the dot-com-era champion that became the world’s most valuable company at its peak in March 2000, this week reached that level again for the first time. It’s a cautionary tale of how far stock prices can depart from reality.

Bulls spend a lot of time denying that there’s a 1990s-style bubble inflating again in artificial intelligence. But it’s worth going through a few of the striking similarities, and some notable differences.

There are lots of ways of valuing stocks, and pretty much all of them make U.S. shares look the most expensive since the dot-com bubble. The forward price-to-earnings ratio, price to cash flow, the “Fed model” calculation of the extra reward offered by stocks compared with bonds and the cyclically adjusted PE ratio all scream that stocks are expensive.

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