Pre-Market Prep: Is AI the Second Dot-Com Boom... or Bust?

[Money Morning Live] The Second Dot-Com Boom: What the Past Tells Us About the Future of AI By Nick Black The Nasdaq is on track for its best first half in 52 years due to what Forbes calls AI-fueled "market euphoria." It's eerily reminiscent of the Dot-Com boom, and if history teaches us anything, it's that market bubbles eventually burst. A quick history lesson... After the Internet debuted to consumers in the early 90s, the stock market experienced a rapid influx of new capital into Internet-based businesses with names ending in ".com," causing the tech-heavy Nasdaq to reach a record-high above 5,000 in March 2000, doubling its value from the year prior. But like all bubbles, the Internet was destined to burst, and the fallout was severe. By October 2002, the Nasdaq had lost 78% of its value, falling from 5,046.86 in March 2000 to 1,114.11. Four things defined this crash: - Overvaluation and Speculation: Many internet companies were grossly overvalued. Investors poured money into any company with a ".com" in its name, ignoring traditional valuation metrics. - Lack of Profitability: Many new ".com" businesses were not profitable and had no clear path to profitability. Of nearly 500 companies that went public in 1999, 77% were not profitable. - Increase in Interest Rates: The Federal Reserve started to increase interest rates in 1999, making borrowing more expensive and reducing the amount of capital flowing into the market. - Investor Panic: In April 2000, bad earnings reports from tech leaders like Microsoft and Dell shook investor confidence, leading to a sell-off that spiraled as investors tried to cut losses. Am I starting to sound familiar? I should be, because we're seeing history repeat itself with AI... [Thankfully, there's a clear course of action to make sure you're not left holding the bag when the bubble bursts...]( --------------------------------------------------------------- Follow the Money With Matthew Carr If you've been following along... then yesterday's market reaction came as no surprise. On Tuesday, we [outlined]( that there's really only one direction stocks move on Consumer Price Index (CPI) data... and that's up! We've been pounding the table to ignore the talking heads, to dismiss the doomsday scenarios, and to chuckle at the chatter about a collapse. The only thing that matters is that CPI continues its descent from the peak back in June 2022. That's precisely what we got... CPI came in at [3%]( below expectations. And inflation rose at the slowest pace since March 2021. As you know, this morning Producer Price Index (PPI) data will be released in less than 90 minutes. We already broke down [the trend]( for you and how to prepare. But know, CPI and PPI are moving hand-in-hand. That's the news we need to force the Fed to finally stop raising rates. Across Money Morning This Beaten-Up Stock Has 84% Upside Potential... When the market turns bullish, savvy investors look for battered companies. Those bear victims with strong fundamentals and an excellent chance to return to... or even blow past... all-time highs as equities sprint higher. [And Shah Gilani has found one such stock here...]( Move Now: This Looks Like the Next Adobe... For nine of the past 12 years, Adobe's raked in revenue hand-over-fist. This is a direct result of its industry-upending business strategy. Now this next tech darling is about to do the same... [Alex Kagin has the ticker.]( Trading Doesn't Have to Be a Gamble... Nothing's better than huge profits on a trade with little risk. After all, nobody should just roll the dice with their cash. But there's one trusty instrument Tom Gentile's used countless times, and it's provided returns as big as 500% within a 12-month timeframe. [But you have to know how to identify the opportunities poised for returns...]( Free Report: Five Stocks Set to Soar as Uncle Sam Pours in $391 Billion... The Inflation Reduction Act is like pure rocket fuel for certain stocks getting 12-figure cash infusions. Our experts have isolated a handful of them poised for extreme gains ahead.[Click here and we'll deliver the report right to your inbox - you'll also get a free subscription to the full range of Money Morning stock and trading research...]( Chart of the Day: The Magnificent 7 Balancing Act In less than 24 hours, "The Great Rebalancing" begins. In only the third time in the Nasdaq 100's history, a move will be made to deflate the dominance of a handful of companies. Currently, Microsoft (MSFT), Apple (AAPL), Nvidia (NVDA), Amazon (AMZN), Tesla (TSLA), Meta Platforms (META), as well as the two flavors of Google parent company, Alphabet (GOOGL) and Alphabet (GOOG), comprise 54.8% of the index's total weighting. They're known as the "Magnificent 7," and they've accounted for the lion's share of the market's gains in 2023. Well, their new weightings will be unveiled tomorrow. These will go into effect July 24. But rest assured, this will have major implications. Don't fret though... To guide investors through this rare market phenomenon, our own Garrett {NAME} is going LIVE from FreedomFest tomorrow morning to show you what this means for the markets... and your portfolio. This is an event you can't afford to miss. So, [click here to set a calendar reminder. And don't worry, this special event is free of charge!]( You are receiving this e-mail at {EMAIL}, as part of your subscription to Money Morning Live. 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