20 Years After Dot-Com Peak, Tech Dominance Keeps Investors on Edge

As Wall Street approaches the 20th anniversary of the piercing of the dot-com bubble, today's decade-old rally led by a few small players shows some similarities that cautious investors are keeping an eye on. From a report: March 11, 2000 marked the beginning of a crash of overly-inflated stocks that would last over two years, lead to the failure of investor favorites including Worldcom and Pets.com and take over 13 years for Wall Street to recover from. That bust ended a 1,000% decade-long Nasdaq .IXIC rally that had been fueled by low interest rates and a rush to invest in the emerging World Wide Web, often at any cost. Now, after hitting a record high on Feb. 13, the Nasdaq has reached over 9,700 points, almost double its high point in 2000 and about eight times the level of its trough in 2002. Among the so-called "Four Horsemen" of tech stocks that fueled much of the 1990s tech rally, only Microsoft's stock price has recovered from the dot-com bust. Intel and Cisco Systems remain below their 2000 highs, while Dell, the fourth member, has since been taken private and then relisted on the stock market.

Microsoft is dueling with Apple for the title of Wall Street's most valuable publicly listed company, with its stock quadrupling since CEO Satya Nadella took over as chief in 2014 and refocused the maker of Windows on cloud computing, a technology central to the current rally in Silicon Valley stocks. With a market capitalization of $1.4 trillion, Microsoft is now trading at over 30 times expected earnings, its highest valuation since 2002, but still less than half of the highest PE it reached during the dot-com era. Intel and Cisco, no longer among Wall Street's most-favored tech stocks after investors refocused on software, are trading at PEs in line with recent years. Further reading: NYU Professor Scott Galloway adds: In the last 13 months Apple and Amazon have added Disney, AT&T/Time Warner, Fox, Netflix, Comcast, Viacom, MGM, Discovery, and Lionsgate to their market capitalization.

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