Wall Street nears dot-com bubble highs: Correction risk?

The US Shiller P/E ratio has surged to 42.18, close to dot-com bubble highs, as AI and tech stocks drive valuations. Analysts warn of correction risks amid these elevated levels.

The US stock market is approaching valuation levels last seen during the 2000 tech bubble, fueled by the surge in artificial intelligence and the dominance of major tech companies. The Shiller P/E ratio, also known as CAPE, has climbed to 42.18, nearing the record high of 44.19 set during the dot-com boom of 1999. This indicates that US stocks, particularly in the tech sector, are trading at historically elevated multiples. Since the start of the year, the S&P 500 and Nasdaq 100 have gained 14% and 24% respectively, pushing valuations above historical norms. Analysts caution that even minor disappointments could lead to sharp market corrections, drawing parallels to the aftermath of the 2000 bubble, when the S&P 500 lost half its value. While some experts highlight the strong earnings of today’s tech giants, concerns about the sustainability of this growth and the risk of a future correction are growing.