Technology stocks have reached a concerning level last seen during the 2000 Dot-com bubble burst, signaling a possible incoming crash.
Specifically, when measured against the M2 money supply, the Nasdaq 100 Index, which tracks the technology sector, has soared to heights not seen since the 2000 boom.
The valuation ratio has once again touched the 1.01 threshold, matching the historic peak reached during the bubble, right before the subsequent crash.
This metric, which accounts for growth in the money supply over the years, offers a reminder that today’s market valuations aren’t just a result of stock price growth.
The last time the tech sector hit this level, the bubble popped, triggering a multi-year bear market and wiping out trillions of dollars in market capitalization.
To this end, today’s parallels are hard to ignore, especially with technology companies seeing meteoric gains over the past few years.
Impact of AI boom
Notably, in recent times, tech stocks have rallied massively, mainly driven by inroads into artificial intelligence (AI) and semiconductors.
For instance, companies like Palantir (NASDAQ: PLTR) have seen massive revenue and stock price growth. Still, analysts remain cautious that the company might be overvalued, raising concerns about a possible crash.
While today’s market may differ in fundamental underpinnings, the euphoria-driven valuations and excessive optimism are reminiscent of the Dot-com era.
Indeed, complicating matters is the possibility of a market crash triggered by renewed trade tensions.
While the market appeared to settle, investors have been rattled after President Donald Trump warned of a possible 50% tariff on the European Union, citing slowed trade negotiations. This comes just after the U.S. and China made progress toward reaching a trade deal.
At the same time, Trump warned that he would slap a 25% levy on all imported iPhones bought by U.S. consumers. Consequently, Apple (NASDAQ: AAPL) stock ended the last session down 3%, at $195.27.
It’s worth noting that in 2025, technology equities have remained largely volatile, recording roller-coaster moves. Therefore, with the sector reaching Dot-com levels, the possibility of a crash is increasingly elevated.
Featured image via Shutterstock
