Technology stocks, as tracked by the Nasdaq 100, have returned to a critical valuation level not seen since the height of the Dot-com bubble burst, this time in relation to the M2 money supply.
As of June 16, 2025, the ratio of the Nasdaq 100 to the M2 money supply stood at 0.89, nearly matching the peak reached in 2000 just before the tech bubble burst, according to data from Barchart.
Interestingly, both peaks share striking similarities, where the 2000 rally was driven by internet hype, while the artificial intelligence (AI) boom is fuelling today’s surge. However, there are key differences in the underlying fundamentals.
As of June 16, the M2 money supply, which includes cash, checking deposits, and easily convertible near-money, totaled $94.12 billion. Despite a much larger economy and greater liquidity, the Nasdaq 100’s valuation is again stretching far beyond the underlying monetary base.
On Monday, the Nasdaq 100 closed at 21,937, up 1.42%.
Influence of AI boom on technology stocks
It is worth noting that, unlike in 2000, when unprofitable startups dominated the rally, today’s market is led by cash-rich, profitable giants such as Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), and Nvidia (NASDAQ: NVDA). These companies are deeply integrated into the global economy and generate consistent earnings.
The AI boom is also delivering measurable productivity gains, unlike the largely speculative internet frenzy of the early 2000s.
Monetary policy has also evolved, with leading central banks such as the Federal Reserve having more tools and experience to manage asset bubbles, and the broader economy is better positioned to absorb potential shocks.
Despite these fundamentals, the valuation concerns are still lingering. In this case, a pullback remains possible, especially for high-flying names like Palantir (NASDAQ: PLTR), which has surged in its AI exposure. Despite strong performance, some on Wall Street warn the stock may be overvalued and due for a correction.
The possibility of a crash is further heightened by the growing geopolitical tensions in the Middle East, which will likely trigger bearish investor sentiment.
Featured image via Shutterstock
