A Wall Street veteran says investors calling today’s AI surge a repeat of the dot-com bubble are missing two foundational differences that separate this cycle from 1999.
In a new Bloomberg interview, Chuck Clough, who has been in the securities and investment business for nearly 60 years, says the dot-com bubble in the late 1990s burst because the companies never generated profits.
“Of course, 99, and I think most people understand that today most of the companies that rode the dot-com boom never generated earnings. In fact, they never generated revenues, many of them. It was all eyeballs that I remember being the moment.”
In contrast, Clough says hyperscalers are making money while funding the data center buildout.
“The hyperscalers themselves are on a totally different level. Even after spending that money, they generate cash, free cash, and that makes a big difference.”
Going back to 1999, Clough points out that the tech firms that survived the crash were able to do so because they gave birth to operating systems.
“There are three companies that rode the boom up, rode it back down, and recovered and became larger, substantially larger companies. One was Microsoft, one was Apple and the third was Amazon. Most other companies, like Pets.com, you don’t even remember anymore. Those three made it. Amazon is a special case.
Microsoft and Apple, they had the operating system, and they made all the difference in the world because they could create the software that made the internet usable. And that was the distinction. Nobody else was able to do that.”
The investing legend says today’s data centers are the new operating systems.
“The thing about the hyperscalers is that everybody can see the vulnerability: too much data spending, too much data center spending.
But in a sense, they resemble the operating system of the dot-com boom. They have the hyperscalers, and they can create the software packages that bring AI to the people. Apple is part of that because they have the phone with which most people, most individuals will access AI. So that’s the question. Who’s going to create the software and generate the revenues? And I think hyperscalers plus Apple have the best chance of being in that situation.”
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