Is this 1999 all over again?
Author: Jason Hsu, PhD
It is the question every client is asking, explicitly or implicitly. They look at the chart of NVIDIA. They see the frenzy around generative AI. They feel the FOMO. And they want to know: Are we in a bubble? And if we are, when does it pop?
My answer, as your honest but characteristically equivocal economist is “yes, this is a FOMO bubble” BUT ON THE OTHER HAND “AI will change life and business even more profoundly than the internet” and finally “the bubble might run for another 18 months and bring all rational investors to their knees or burst next quarter”.
To be sure, this current raging bull market has all the hallmarks of the Dot-Com era: 1. a genuinely transformative technology that we can only begin to imagine its full impact on productivity and future product innovation, 2. a valuation frenzy that feels disconnected from any rational or even irrational growth projection and 3. babbling tech bros who celebrate promoters whose claims stretch well beyond any rational foundation like Messiahs.
But there is one critical difference between 1999 and today—a difference that suggests this bubble could get much bigger and last much longer than we think.
The “Infinite Cash” Problem
The internet bubble of the late 90s was fueled by venture capital. It depended on external money to finance the dreams of Yahoo, Webvan.com and Pets.com. When the VC well ran dry, the party ended abruptly. The underlying companies were burning cash with no end in sight. There just wasn’t enough willing capital to throw itself after bad money.
Today is different. The AI revolution isn’t being funded by VCs hoping for an exit; it is being funded by the “Magnificent Seven”—the richest, most cash-flow-positive companies in the history of capitalism. They are the eternal spring of growth capital!
Microsoft, Apple, Google, Meta, NVidia—these companies are minting money faster than the government can print it. They don’t need external funding to keep the AI party going. They can afford to be incredibly patient. They can easily shrug off bad IRR, which would otherwise doom a VC fund, in the name of strategic investment; regardless, given current their size and profitability, poor ROI on incremental CAPEX is entirely negligible. They can throw tens of billions of dollars at infrastructure and R&D year after year without blinking.
This combination of “patient growth capital” and “extremely deep pocket with low shareholder governance” results in a CAPEX spending spree that is not dissimilar to the U.S. government’s unchecked spending financed by a printing press. As a result, the bubble has a much stronger structural support system than it did in 1999. It means the runway is longer. We might be in the 5th inning, not the 9th.
The Conversation You Must Have Today
So, how do you talk to a client who sees this run-up and wants to chase it? Or conversely, a client who is terrified it will all collapse tomorrow?
The advisor’s job isn’t to predict the top. Even the best investors in the world can’t do that. Your job is to frame the trade-off.
Sit down with your client and say this:
“Look at your portfolio. Because you own the S&P 500, you have already participated in this spectacular run. You own NVIDIA. You own META, TSLA and MSFT. You have won.”
“We might be in the middle of a 9 inning baseball game. It could go up another 50% or even 100%. But we also know how this story ends. When the internet bubble burst, the NASDAQ dropped nearly 80% and spent the next 15 years in recovery.”
“So here is the choice: What is more important to your retirement right now? Is it the excitement of riding this wave to the absolute bitter end? Or is it the predictability of knowing your retirement plan is secure—and even accelerated because you were lucky enough to have participated in a raging bull market and wise enough to have taken profit.”
Trading FOMO for Certainty
This isn’t about being a bear. It is about defining “enough.”
If a client chooses to de-risk, they aren’t “missing out.” They are exchanging potential upside for guaranteed peace of mind. They are cashing out their winning lottery ticket instead of rolling it back in hoping for more big wins.
By making this an explicit decision—by saying, “We acknowledge we might leave money on the table, and we are okay with that because we prefer certainty”—you inoculate the relationship against regret. You take yourself out of the impossible game of market timing and put yourself back in the role of the fiduciary.
In my view, the AI bubble is real. It is powerful. It is backed by unlimited capital. It could run for years. But you don’t need to bet the farm on it to have a successful retirement. You just need to decide when you’ve won—and you have already won.
Important Disclosures
The views expressed in this article are those of Jason Hsu and are provided for informational and educational purposes only. They do not constitute investment advice, a recommendation, or an offer or solicitation to buy or sell any security. References to specific securities are for illustrative purposes only and do not constitute a recommendation to purchase, hold, or sell those securities. Past market events and performance are not indicative of future results. Investing involves risk, including the possible loss of principal. This material is intended for independent financial advisors and registered investment advisers (RIAs) and is not intended for distribution to retail investors. Sowell Management is a registered investment adviser. Registration does not imply a certain level of skill or training.
