Five charts to start your day

What will happen if investors decide to dump the mega techs?

In March 2000, I was in love. I was 16 years old and I innocently thought that one day I would marry my first ever girlfriend. The future was bright. A few months later she dumped me.

In many ways that’s what happened with the dot-com bubble, which sort of happened around the same time. Investors were in love with the future. The Internet was about to take over the economy and e-commerce was all the rage. Then pop! That's what this table below is about. A snapshot of innocence and over exuberance about the future.

Take a look at Cisco systems! Its market capitalisation peaked at about $555 billion just before the dot-com bubble burst. Today, Cisco's market cap is approximately $186.45 billion – ouch! Now take a look at the rest of this table. Many of these companies no longer exist, have been absorbed into other entities, or have been drastically reduced in prominence.

The future may be bright, but it's not certain. Hyper growth doesn't exist forever. It's true that many large tech companies are a little different from what they were 24 years ago. The mega techs are at least very profitable, but again the future is not certain and a lot has already been priced in today with these companies.

Pricing so much into the future is a very risky business. There is always the chance that you might be left disappointed. Cisco has a PE ratio of 148.4. That meant it would have taken 148.4 years for the company's earnings to equal the price paid for the stock.

Today, NVIDIA’s forward PE ratio is 44.8 times. I’ll probably be dead before I’m paid back.

The S&P 500 at the peak of the Dot-Com Bubble

Source: Alexander Vogt

Coming up:

• The US Federal Reserve posts a record loss of $114 billion in 2023

• Share of S&P 500 firms mentioning Al on earnings calls

• German industrial production has steadily declined

• Berkshire Hathaway’s portfolio

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