AI Boom Echoes Dot-Com Bubble, but Earnings Growth May Sustain the Rally

The S&P 500’s cyclically adjusted price-earnings (CAPE) ratio has topped 40 for five straight months—the highest stretch since the dot-com era—hinting at potential bear-market risks if history repeats. But the AI surge is lifting earnings growth (analysts expect ~31% this year) and adoption is rapid, suggesting valuations may be justified for now. The piece warns CAPE is backward-looking and notes several key differences between the current AI-driven rally and the 1990s internet boom, leaving the ultimate outcome uncertain.