Good Afternoon,

David, Carson, and I were talking the other day, and we noticed that this question has come up quite a bit recently, both in conversations with clients and in what we’re seeing in the media: “Are we in another tech bubble?”

It’s a fair question, especially with how much attention AI and large tech companies have been getting and continue to receive. One thing that’s worth keeping in mind – these types of “bubble” narratives tend to show up in just about every market cycle. Whether it was housing in the mid-2000s, tech in the 2010s, or now AI, there’s almost always a reason investors feel uneasy when a particular area of the market starts leading.

When people compare today to the early 2000s, I understand where it comes from. But when you actually look under the hood, today’s environment is very different. Back then, many of the companies driving the market had little to no earnings. Valuations were based almost entirely on future potential, not current cash flow. Today, the companies leading the market – Nvidia, Microsoft, Alphabet, Meta Platforms, and Amazon – are generating massive amounts of real cash flow. These aren’t speculative businesses trying to figure out a model… they are some of the most profitable companies in the world.

Another point worth noting is that today’s market is fairly concentrated, with a handful of large companies driving a meaningful portion of returns. That can feel uncomfortable and often leads to “bubble” comparisons – but concentration by itself doesn’t automatically mean we’re in a bubble. In many cases, it simply reflects where earnings growth is actually coming from.

A lot of what drives the “bubble” conversation tends to be narrative-driven – headlines, excitement, and rapid innovation. What we try to stay focused on, though, is whether the underlying fundamentals support that narrative. And today, unlike in the early 2000s, the fundamentals are there.

One helpful way to visualize this is by looking at valuations over time. At the peak of the dot-com bubble, the Nasdaq traded at extreme multiples, often well over 100x earnings. Today, even the largest technology companies are generally trading in the mid-20s to low 30’s range. That’s not cheap, but it’s a very different starting point than what we saw in 2000.

None of this means we won’t see volatility. We absolutely will. Even high-quality companies can experience meaningful drawdowns at times, especially when expectations reset or sentiment shifts. Where we tend to see investors get into trouble is trying to act on the idea that a “bubble” is about to pop – moving to cash, waiting for a correction, and missing periods where markets continue to be driven by strong earnings.

From our perspective, the takeaway isn’t to ignore risk but to stay grounded in what’s actually driving returns today: real businesses, real earnings, and long-term growth.

As always, our focus is on building portfolios that can participate in that growth while being prepared for the inevitable ups and downs along the way.

If this has been on your mind or you want to talk through it further, we’re always happy to connect.