'It seems like it's 1999': Wall Street argued about the outlook for the US stock market

Since the end of March - also on the back of a positive reporting season, as well as hopes that agreements to end the war in the Middle East will soon be reached - the S&P 500 index, despite a significant increase in energy prices and the continuing rise in inflation in the U.S., has jumped more than 14%, several times reaching all-time highs. However, more than half of this index growth was driven by just five technology giants - Alphabet, Nvidia, Amazon, Broadcom and Apple.

Against this backdrop, Wall Street analysts are divided over the future of the current rally: while some are raising their forecasts for the S&P 500, others are drawing disappointing parallels to the dot-com bubble of the late 1990s. The main dispute revolves around the AI sector.

In trading on Ma. 12, the S&P 500 and Nasdaq Composite have pulled back from the record highs they reached the day before at the close, with the broad index of American stocks falling 0.79% and the technology index falling 1.8%.

- This week, analysts at Yardeni Research raised their year-end forecast for the S&P 500 index from 7,700 to 8,250 points. This comes after consensus corporate earnings forecasts for S&P 500 companies for 2026 and 2027 far exceeded even the firm's most optimistic expectations, Yahoo Finance points out. "We have never seen consensus earnings expectations for the current year and beyond rise as fast as they have in recent months," said Yardeni Research co-founder Ed Yardeni. "As a result, the stock market has started to rally, fueled by strong earnings numbers" (quoted in Yahoo Finance).

- Meanwhile, semiconductor stocks are rising so much faster than the rest of the market that analysts are increasingly recalling events on the eve of the dot-com crash. "Given the low [that U.S. stocks reached] on March 30, 2026, and the performance they've been showing especially in the last couple of weeks, it feels like it's 1999," said Evercore ISI strategist Julian Emanuel. - Family, friends, doctors, Uber drivers - everyone is discussing AI and tech stocks" (quoted by Yahoo Finance).

However, Emanuel and his team emphasize that the market enthusiasm of 2026 rests on a much stronger foundation than in the dot-com era. Whereas in 1999 the median P/E ratio (ratio of stock price to company earnings) for "market favorites" was around 152, meaning investors were willing to pay $152 for every dollar of companies' net income, today's AI sector trades at a ratio of about 39. According to Emanuel, while current valuations look high, they are still far from the extremes of the dot-com crash era.

- A more accurate parallel for the current market situation is 1997, according to Niles Investment Management fund manager Dan Niles "We're [living the equivalent of] the third and fourth years of building the Internet infrastructure," he said. During those years, Niles was a respected analyst on the chip and PC sector before retraining as a fund manager, MarketWatch clarifies. While chipmaker stocks look overheated in the short term, their valuation doesn't seem unfair when investing long term, Niles adds. "Intel shares just last year returned to 2000 levels," he notes. - They are still undervalued relative to the earnings potential the company can realize."

- The Nasdaq Composite index will rise to 30,000 points next year, predicts Wedbush Securities Managing Director Dan Ives (at the close of trading on Ma. 11, it rose to 26274.13 points, reaching a new all-time high for itself; since the beginning of the year, the index is up more than 10%). Ives believes the strong reporting season will continue to fuel market participants' enthusiasm for AI-related stocks. He calls what's happening a "memory supercycle," referring to the unprecedented demand for memory chips amid increased interest in AI. "We are extremely optimistic about companies like SK Hynix and other memory makers," he added (quoted by CNBC).

- Despite the general optimism, the market's internal structure points to some anomalies, notes BTIG strategist Jonathan Krinsky. He notes that last Friday, Ma. 8, marked only the third time since 1990 that the number of S&P 500 stocks hitting new lows exceeded the number of stocks making new highs - and this on a day when the index itself rose to a new all-time high at the close (7,412.84 points), Yahoo Finance points out.

- Peter Boockvar, chief investment officer at Bleakley Financial Group, also pointed out a disturbing phenomenon: the S&P 500 Index hit an all-time high at the same time that 5% of its constituent stocks plummeted to their 52-week lows. Such a situation - when the market rises amid weakness in a wide range of companies - has happened only three times in history: in July 1929, January 1973 and December 1999, a year before the dot-com bubble burst, Yahoo Finance notes.

- Michael Burry - the investor who was one of the first to predict the global financial crisis and made money from it, who later became the prototype for the character in the movie "The Downgrade" - in turn noted: "Stocks go up or down not because of [U.S.] jobs data or consumer sentiment. They go up simply because they were going strictly up. It all hinges on a two-letter thesis [AI] that everybody thinks they understand" (quoted in Yahoo Finance). "If you've had enough skill or you've just been lucky enough to hold stocks that are skyrocketing right now, or you've accumulated large profits in stocks with strong market inertia, now is a good time to consider locking them in," Burry recommended on May 11.

This article was AI-translated and verified by a human editor