The Dot-Com Bubble Might Be Repeating Itself... With Different Players

Editor's note: Here at Empire Financial Research, Whitney has been bullish on some of the biggest tech stocks that have taken a beating in 2022. But we still listen to what smart folks on the other side of the argument are saying... As such, today in Empire Financial Daily, our friend and colleague Joel Litman […] Not rendering correctly? View this e-mail as a web page [here](. [Empire Financial Daily] Editor's note: Here at Empire Financial Research, Whitney has been bullish on some of the biggest tech stocks that have taken a beating in 2022. But we still listen to what smart folks on the other side of the argument are saying... As such, today in Empire Financial Daily, our friend and colleague Joel Litman – founder and chief investment strategist at our corporate affiliate Altimetry – is back to share a warning about a similar setup to the dot-com bubble that could be playing out in the markets today... --------------------------------------------------------------- The Dot-Com Bubble Might Be Repeating Itself... With Different Players By Joel Litman --------------------------------------------------------------- [How to profit off a volatile market]( Can you survive the upcoming recession? When the end justifies the means... It’s important to protect your family from what’s coming... A bridge over troubled water... [Click here to learn more](. --------------------------------------------------------------- The 'dot-com bubble' is a catchy name... but it's a misnomer. The term is commonly used for the 2000s economic hiccup. However, it doesn't accurately describe what happened. You might remember early Internet companies like Pets.com. That business went public at $11 per share in 2000... before it even figured out how to make money. The company famously sold pet supplies online for less than it paid to get those supplies. Less than a year later, Pets.com was bankrupt. That's one of the most memorable stories. It's the kind of thing people typically think of when they hear about the dot-com bubble. But in reality, a lot of the wealth created and destroyed between 1998 and 2002 had nothing to do with speculative dot-com companies. Let me explain... The true culprits of the 2000s economic slowdown were the much more viable, well-established telecom-equipment players. Telecom companies boasted grossly overconfident valuations in the late 1990s and early 2000s. As more stuff moved online, companies that built the physical bones of Internet infrastructure soared. Cisco Systems (CSCO) was a prime example of extreme market optimism... At its peak in March 2000, Cisco's market cap reached $555 billion – a level it has never come close to since. Once the bubble burst, its stock fell more than 80%, wiping out hundreds of billions of dollars in value. These companies drove the mania in the broad market, too... Valuations got so crazy because of massive investment from telecom companies in the late 1990s. Some of this investment came as a result of Y2K... And some of it was because telecoms expected increased Internet demand and digitalization of businesses. Said another way, valuations soared because growth was so strong. Stocks were rising like that growth would last forever. Eventually, folks realized that this wave of investment had an expiration date. When that happened, valuations deflated. Telecom businesses could no longer afford to grow at the same rate. Laying fiber optics and new communication grids is expensive. Without the necessary cash flows, these companies were forced to slow down. And the rest of the market followed. --------------------------------------------------------------- Recommended Link: [Revealed: Apple's future iPhone design]( You're looking at the details of a patent application that Apple quietly filed in 2021 for a flexible iPhone. The unique screen in the design blueprint could be the result of a new technology that is going to change our lives. Forbes calls it "the next Industrial Revolution." It will help make everything cheaper, faster, better, and safer... from smartphone screens to computer chips, to vaccines, to construction materials, and more. And one little-known company is leading this revolution. Getting in early could lead to huge profits. But you'll have to do it before the news of this company reaches the masses. [Click here before it's too late](. --------------------------------------------------------------- We might be seeing the same scenario playing out today – with different players... This time around, it isn't the telecom companies looking like the Monopoly man with their pockets turned inside out. It seems like the recent slowdown in venture-capital ("VC") spending is hurting tech earnings. A slew of Big Tech companies including Amazon (AMZN), Google parent Alphabet (GOOGL), Intel (INTC), and Microsoft (MSFT) have been riding a wave of sustained demand to rising valuations for the past three years. This demand was initially boosted by what we call the "at-home revolution." People were stuck at home during the pandemic and became more dependent on tech services than ever before. But that was only a portion of what boosted earnings for Big Tech... The real driver for things like Amazon Web Services, Google Cloud, Microsoft Azure, and Intel's chips has been VC-funded companies with near-unlimited budgets for these projects. These firms spent money freely to build scale. Profits weren't their main priority for the immediate future. But now, they can't afford the luxury of time. With interest rates rising and funding rounds vanishing, these venture startups have to make tough decisions. If they don't become profitable soon, growing revenues will no longer be their only priority. That's why they're now desperately rushing to cut costs. And without limitless VC budgets to fund growth, Big Tech is rapidly disappointing investors... Plenty of folks think this is an opportunity to 'buy the dip.' But at my company Altimetry, we're a little more cautious... From 2000 to 2002, Big Tech companies lagged the rest of the market as it recovered. These stocks stayed below their all-time highs for a long, long time following the so-called dot-com bubble. We might be seeing the same thing today. Big Tech could be dead money for a while as valuations come back down to Earth. Shares of some of the biggest names in the sector have plunged following disappointing earnings. And with interest rates continuing to climb, it doesn't look like they've found their bottom yet. Of course, not every tech company will underperform. Specific businesses can still fare well in this environment. But you might want to focus your money elsewhere for the time being... Big Tech stocks likely have plenty of room to fall from here. Regards, Joel Litman December 5, 2022 Editor's note: Joel recently stepped forward with a critical new warning for investors... In short, he says that if you're an ordinary investor or have any money in cash, you are grossly unprepared for what's ahead in 2023. In a special presentation, he shares all the details – free, for the first time ever to the general public – and what steps you need to take to prepare. [Learn more here](. --------------------------------------------------------------- If someone forwarded you this e-mail and you would like to be added to the Empire Financial Daily e-mail list to receive e-mails like this every weekday, simply [sign up here](. © 2022 Empire Financial Research. All rights reserved. Any reproduction, copying, or redistribution, in whole or in part, is prohibited without written permission from Empire Financial Research, 380 Lexington Ave., 4th Floor, New York, NY 10168 [www.empirefinancialresearch.com.]( You received this e-mail because you are subscribed to Empire Financial Daily. [Unsubscribe from all future e-mails](