The Dot-Com Bubble
I am a relatively young professional so haven't been through much of a crash. For those who were actually in a seat during the dot-com bubble and the consequent crash, how was it? Did you see it coming? Would love to hear some stories about what worked, what didn't, why some funds/pods blew up and some made a name for themselves.
The Dot-Com Bubble was a wild ride, and the stories from that era are both cautionary and insightful. Based on the most helpful WSO content, here’s what you need to know:
The Crash and Its Impact:
Fraud and Mismanagement:
Why Some Funds Blew Up:
What Worked for Survivors:
Lessons Learned:
The Dot-Com Bubble serves as a reminder that while markets can be euphoric, they can also be brutal. Those who stayed disciplined and avoided the hype often emerged stronger.
Sources: https://www.wallstreetoasis.com/forum/investing/my-key-takeaways-from-the-introduction-of-the-intelligent-investor-part-116-to-be?customgpt=1, Distressed Investing: This Time It's Different, 08' Recession - How bad was it really?, Still want the job? Are you prepared?, https://www.wallstreetoasis.com/forum/investing/solving-a-crazy-problem-the-daily-peel-52223?customgpt=1
Looking at the circular and inflated nature of current Ai investments, in a couple months to years you might get a live reenactment!
Lmao thought the same thing. Brace yourselves!
This bubble is definitely going to pop, the real question is when. Shiller CAPE of 40+ is now the highest it has been in 25 years. Some external event usually starts the pop. OpenAI has no path to ever making a profit to pay for all these deals, and even the ceos are admitting it now.
I'm more concerned about the cyclical nature of revenue here. OpenAi paying Oracle, Oracle paying Nvidia, Nvidia paying OpenAi, OpenAi paying AMD, AMD giving OpenAi shares to buy AMD chips, etc. It's really similar to how telecom companies would do vendor financing in 2000. Everything about this is just dumb. 1T in deals and OpenAi can't even make a penny in profit.
At this point, the hope and dreams of continued economic prosperity is basically all on the back & shoulders of Nvidia. My question for those who lived through the dot-com bubble, how did the ship right itself and how long did it take? Which ancillary industries were the casualties and who were the unexpected beneficiaries?
Track what stock prices and multiples do when information flows through. It tells you what market is thinking about each new number incorporated.
- Hyperscaler + neo-cloud capex tracking + energy tracking
- How are AI models progressing? Are we asymptoting aggressively?
- How do stock prices react to news? How about chatter? Do we see exhaustion on infrastructure plays as OAI announces next gigawatt deal or whoever?
In my mind, what happens when OAI or GOOG or whatever start attaching more numbers to AI rev/efficiencies next year? EX: OAI says they expect to make $5bn off of agents buying whatever. Well suddenly its not pie in the sky efficiencies anymore, but its "we spent $xyz hundred billion to make $5bn"
Stock prices could also preciptiate the spending here. META has a tougher time justifying $100bn in capex for ??? and some useless glasses when they maxed out ad loads to give them cover. Or ya know, AI has opened up a flood of spend, ROAS increases, agencies cede more wallet share (and just even ADBE honestly since its all AI slop generated), and they keep the train chugging. Point being, stock price down = harder to spend. Macro could stop things in their tracks.
For now, its just straight rate cutting with a decent and resilient economy, numbers still being mostly ok enough, and just mind boggling insatiable demand by those with trillion dollar balance sheets, and a capital markets that is horned up to pick up the slack.
We will rip until further notice. Although the fact I am even typing this and the rip is becoming so accepted probably means this will serve as the peak post.
As druck said, analyze what 6-12 months from today will look like; not just the end state, but the future perception state in 6 months. We are in the midst of/finishing off another inflection in demand perception right now that finally wormed its way through. Will people be more optimistic about the fwd. 12 months in 6 months, etc.
TLDR; the ship rights itself violently
no one who lived the dotcom bubble is on WSO lol
better question is how did the old heads who were in HFs during covid fare?
bro covid was just 5 years ago
and just looking at resiuls it was really easy to navigate every fund was putting up amazing numbers in 20 and 21 across all strategies and sectors...obvious winners and lovers during lockdown, then the reversal trade. seems like it was super straightforward for everyone
It was easy for individuals and prop firms but a lot of big funds did had their worst years ever, like Rentec external funds and Bridgewater.
Vel pariatur quas adipisci ut ut. Ipsum harum autem veritatis necessitatibus qui vitae magnam sit. Atque officia vel voluptas enim nisi.
Error et non qui expedita dolores illo ullam. Eius aut aliquam quia. Dolore cum ea velit alias sit.
Laboriosam maiores aliquid non odit aut natus neque. Minus aut libero voluptas ab.
Perspiciatis voluptas dolores delectus suscipit id eveniet consequuntur ut. Aliquid voluptatem qui ea accusamus ut pariatur. Eum iste repellat sint doloribus earum porro. Reprehenderit quia ad quia ut unde quos recusandae. Quas porro ut itaque possimus harum fuga dolorem perspiciatis. Voluptas doloremque harum quia.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...