Stock Talk - Dotcom Bubble vs. AI Investment: Could the Federal Reserve “Family Fight” End Today’s Enthusiasm?

Episode Date: September 4, 2026

What if artificial intelligence changes the world—but some of today’s leading AI stocks still turn out to be the wrong investments at the wrong prices? In this episode of Stock Talk, Chris Perras looks back at the Dotcom era to explore an important distinction for investors: a technology can transform the economy without every stock connected to that technology delivering great investment returns. The Internet didn’t fail after the Dotcom crash. It went on to reshape commerce, communication, advertising and entertainment. But many technology investors still suffered enormous losses as valuations changed, interest rates rose and market leadership shifted. Could something similar happen during the AI boom? Rather than trying to predict an AI crash, Chris focuses on three signals that may help investors recognize whether market leadership is beginning to change: • STOCKS — Is technology continuing to dominate, or is leadership spreading into financials, industrials, energy, materials and international markets? • INTEREST RATES — What are the Federal Reserve, the 2-Year Treasury and the 10-Year Treasury telling us about the cost of money? • THE U.S. DOLLAR — Is the dollar strengthening and tightening global financial conditions, or weakening as commodities and international markets gain strength? Chris also explores a fascinating possibility: the massive infrastructure required to build artificial intelligence may eventually benefit businesses far outside traditional technology. AI data centers require electricity, copper, steel, cooling systems, transformers, natural gas, nuclear power, grid equipment and other physical infrastructure. Could the AI boom itself help create the next generation of market leaders? History doesn’t tell us exactly what happens next. But it can help investors recognize the conditions that have accompanied major changes in market leadership before. The important question may not be whether AI succeeds. It may be whether today’s investors are paying the right price for that future. If changing interest rates, inflation, market leadership or a different investment cycle has you wondering how your retirement plan could be affected, contact Oak Harvest Financial Group to schedule a conversation about your financial plan. Subscribe to Stock Talk for more conversations connecting market history with what’s happening in the economy and financial markets today. This material is for general education and information only. It isn’t individualized investment, tax or legal advice. Any mention of stocks, sectors, commodities or asset classes is for discussion only and shouldn’t be seen as a recommendation to buy or sell any investment. Investing involves risk, including the possible loss of principal. Past performance doesn’t guarantee future results. Advisory services are offered through Oak Harvest Investment Services, LLC, an SEC-registered investment adviser. SEC registration doesn’t mean the SEC or any other regulator endorses the firm, and it doesn’t mean a certain level of skill or training. #ArtificialIntelligence #StockMarket #Investing #AIStocks #MarketOutlook   Chapters:   0:00 AI Can Win While AI Stocks Lose 1:44 Is AI a Bubble—or the Wrong Question? 2:44 What the Dotcom Era Can Teach Us 4:59 Signal #1: Watch Market Leadership 6:30 Could AI Create the Next Hard-Asset Boom? 7:13 Signal #2: Watch Interest Rates 9:09 Signal #3: Watch the U.S. Dollar 10:57 How Similar Is Today to the Dotcom Era? 12:06 The Biggest Lesson From the Dotcom Crash 12:58 Three Signals Investors Should Watch Now

Investors, what if artificial intelligence changes the world, and some of the stocks leading the AI boom still turn out to be wrong investments at the wrong price. I know that sounds strange, but we've seen something like this before. The internet changed modern life, yet after the NASDAQ peaked in March of 2000, it later lost about three quarters of its value from top to bottom. The technology was real, but investors had paid very high prices for future growth, and then the money environment changed. That matters today. At its July meeting, the Federal Reserve kept its target rate at three and a half to three and three quarters percent, but three Fed officials wanted to raise rates by a quarter point. Chairman Kevin Walsh has talked about wanting a real family fight inside the Fed, and this time he got one. Then at Jackson Hole last week, Warsh made the problem clear. Inflation still was above the Fed's 2% goal.

He didn't promise a rate hike, but he also didn't take one off the table. So investors now have to ask a different question. What if rates stay high? Or what if they move even higher if inflation stays sticky? Tighter financial conditions cool, the price investors are willing to pay for today's AI leaders, even if AI itself keeps growing. And if market leadership changes, where might the money go next? Because when one part of the market loses leadership, the money doesn't always leave.

Sometimes it moves. And there are three clues I think are worth watching. Stocks, interest rates, and the dollar. None of these can tell the future by themselves, and I'm not saying technology is about to fall. The goal is to watch for signs that the market may be changing. And before we get into those three signals, if you like this kind of market history

and want some more stock talk videos that connect to the past with what's happening now, subscribe to the channel and hit the notification so you don't miss the next video. Investors, here's why I think this matters. A lot of people are asking, is it an AI bubble? I think that may be the wrong question. The better question is this.

What happens if AI keeps winning is technology, but some AI stocks stopped winning his investments. The internet didn't fail in 2000. It went on to reshape the world. But technology stocks still went through a brutal bare market. And underneath that crash, something important happened. Technology lost leadership, but investing didn't stop. Money started moving towards companies with earnings, lower valuation, and real assets.

Financial stocks, materials, energies, miners, commodities, and some international markets began to get more attention. This shift didn't happen in one. one day and these areas did have big losses at times, but the main lesson is simple. One market leader faded and another one started to grow. So I don't want this video to become another guess about whether the NASDAQ is about to crash. No one knows ahead of time. I want to ask a more useful question. What science might tell us that the market leadership is changing? Here's where the dot-com comparison matters. In the late 1990s, investors were willing to pay

huge prices for profits they expected years into the future. Technology spending, was booming, semiconductors were leading, companies were spending on fiber, routers, servers, telco equipment, and semiconductor plants. Today, the names have changed, but the pattern looks familiar. Companies are spending heavily on GPUs, CPUs, memory, networking, data centers, cooling systems, and power infrastructure. That kind of spending can support high stock prices when growth is strong and money is easy to get. But the farther profits are in the future, the more interest rates can matter. After long, term capital management crisis in October of 1998, the Federal Reserve cut rates. Then came

Y2K, and the Fed made sure there was enough liquidity in the system. Technology stocks ran hard into early 2000, then the Federal Reserve changed direction. The target Fed funds rate reached 6.5% by May of 2000. That doesn't mean that the Federal Reserve alone caused the dot-com crash. Valuations were very high. Speculation was everywhere. Expectations had moved too far, too fast. But higher rates did add to the pressure. When the cost of money rises, investors may pay less today for profits that won't show up for many years. That can hurt high growth stocks with high valuations. And that may be part of the dot-com story that matters most today.

The market didn't decide technology had no future. It changed, but it was willing to pay for that future. Investors, if all we learned from 2000 is technology crashed, we may be watching the wrong thing today. First clue may not be a crash at all. It may be a quiet change under the surface. The major indexes could still look fine, AI companies could still be posting strong earnings, but maybe more stocks in other industries are starting to do better.

Maybe commodity prices rise. Banks or industrials gain strength. International markets improve. The dollar changes direction. Bond yields start to send a different message. Those are the clues. They're not guarantees. But if enough of them start pointing the same way,

the market may be telling us that leadership is changing. So let's look at the three signals that matter most right now. Stocks, interest rates, and the dollar. Okay, point one is stocks. The dot-com bubble ended, but investing didn't. When the NASDAQ peaked in March of 2000, investors didn't stop investing. They changed what they wanted to own and what prices they were willing to pay.

Many internet companies had little or no profit. Even strong technology companies traded at very high valuation multiples because investors expected years of huge growth. Then, financial conditions, got tighter, expectations changed, and those future profits looked less valuable. The NASDAQ later lost about three-quarters of its value from the top. But while technology was getting hit, money began moving towards companies with current earnings, high cash flow, real assets, and lower valuations. You may hear the term GARP, which is growth at a reasonable price. Financial

started getting more attention. So did materials, energy, miners, and some international markets. The key lesson isn't that technology went down and every hard asset went up, markets don't really work like that. They're not that easy. The lesson is that leadership changed, and one big reason why they changed was China. China joined the World Trade Organization in December 2001 and then built at a massive scale. They built factories, roads, rail systems, power plants, buildings that took raw materials, it took copper, it took iron ore, steel, coal, oil, cement, and demand grew fast and support. And Ply couldn't always keep up. What happened?

Prices rose. That helped create a powerful hard asset cycle. And this is where the AI story gets interesting. AI is digital technology, but building AI takes a lot of physical stuff. Takes data centers needing electricity, crids need copper, data centers also need steel and cooling systems, transformers,

backup power and special electrical equipment. Some of those power systems use natural gas. Others depend on nuclear energy and uranium. So AI spending could support businesses outside the normal technology sector. That doesn't mean copper, uranium, natural gas, utilities, industrials, or materials will automatically beat the market.

These areas can fall hard too, but it creates an interesting possibility. The AI boom itself could help build the next group of the market leaders outside traditional AI stocks. So our second point here is on interest rates. The Fed has control over short-term interest rates, while the market has a bigger role in setting longer-term rates.

Fed funds tell us what the central bank is doing. The 10-year treasury tells us more about what the bond market thinks about inflation, growth, and risk. The difference matters. In 1999 and 2000, the Fed tightened while technology valuations were very high. That made the setup harder for stocks whose value depends on profits far in the future. Because changes in Fed policy are often reflected quickly in shorter-term treasury yields, the two-year treasury yield gives us another useful way to see that shift. So let's take a look at the two-year Treasury then and now.

The exact levels are different, but the patterns are worth watching. In both periods, short-term rates moved higher as investors had to pay higher prices as the Fed tightened. That doesn't mean today has to end the same way, but it gives us another clue that the cost of money matters when technology valuations are high. Today, the Fed has its target rate at 3.5 to 3 and 3 quarters percent, but three voting members wanted a quarter point increase at the July meeting. Last week at Jackson Hole, Warsh said inflation is still too high above the Fed's 2% goal. He also made it clear that the Fed isn't locked in to one path. So instead of pretending we know what happens next, I'd watch both ends of the rate market. The Fed gets tighter while the 10-year Treasury stays higher rises.

That could make money more expensive from both directions. Stocks that depend heavily on profits many years from now can be more sensitive to that. But even that isn't automatic. Strong earnings and growth can help offset some of that rate. pressure. So this is a risk to watch, not a forecast. Here's the key point. Saying AI could change the world isn't the same thing as saying every AI stock is a good buy at today's price. A great company can still be too expensive. Price does matter. Expectations matter and the cost of money matters. Point three is this, the dollar. A lot of individual investors ignore the dollar

because they're not trading currencies. But the dollar can tell us a lot about global financial conditions. Many commodities are priced in dollars. A lot of global borrowing and trade is tied to dollars and a stronger dollar can sometimes go a long way in tightening financial conditions. A weaker dollar can sometimes help commodities and non-US assets, but these relationships change over time, so they shouldn't be treated like a simple trading rule. And this is another place where the comparison gets very interesting. So here's the chart of the dollar during the dot-com period, overlaid with the dollar today again. Again, I'm not saying, saying the two periods have to follow the same path. They won't. But the shape can help us think

about where global money is flowing and whether financial conditions are becoming easier or tighter. During much of the late 1990s, the dollar was strong as money flowed towards the United States, its technology companies, and its strong economy. Later, as technology leadership change, the dollar weakened, and that helped create a different backdrop for commodities and international markets. That's why today I'd watch the dollar, together with tech stocks and the treasury yields, Imagine technology leadership starts to weaken while yields rise and the dollar gets stronger? That could point to tighter financial conditions and a tougher setup for expensive growth stocks. But then again, imagine something different.

Technology leadership slows, the dollar weakens, and commodity-related markets start getting stronger. That could mean money is spreading into other parts of the market instead of simply leaving. Maybe investors start paying more attention to the physical side of AI. Power generation, electrical equipment, copper, and steel, natural gas, nuclear fuel, grid equipment, cooling systems. If that isn't a recommendation to buy those assets, it's a scenario worth watching. So how close is today to the dot-com era? There are some real similarities.

Both periods center on technology that investors believe can change the economy and the world. Technology and semiconductors have been major market leaders. Both periods saw huge infrastructure spending, and in both cases, the cost of money became an important part of the story. But investors, there also might be big differences. Many of today AI leaders have real revenue, real earnings, and large amounts of cash flow. The Fed is starting from a different place. Today's inflation problem is different, and the geopolitical backdrop is much harder, with energy security, tariffs, trade restrictions, and supply chains playing a much bigger role.

So history may rhyme, but it doesn't have to repeat. And maybe the strangest rhyme is the NBA. In 1999, the San Antonio Spurs beat the state. in New York Knicks four games to one in the NBA finals. This year, 2006, those same two teams met again. This time, the Knicks won four games to one. Same teams, same stage, different winner. That may be the perfect way to think about markets.

History can look very familiar without giving us the same ending. And that brings us back to the one idea I want you to remember. The dot-com bubble didn't end because the internet failed. The internet went on to change shopping, advertising, communication, entertainment. It helped create some of the biggest businesses in history. All of that was true. An investor still could have lost a huge amount of money by owning the wrong companies at the wrong prices.

That's why being right about a technology isn't enough. You also have to think about the price you're paying and the financial conditions around it. When the cost of money changes, the value investors place on the future profits can change too. That doesn't mean AI stocks have to fall, and it doesn't mean materials, energy, and commodities have to lead next time around. What history tells us is simpler than that. Leadership changes. The future of AI and the future returns of AI stocks are two different questions. Keeping those questions separate can help investors think more clearly.

So from here, I'd watch those three things. First, stocks. Does technology keep leading or does leadership start spreading into financials, industrial, energy, materials, or international markets? Second, interest rates. Does the Fed get tighter? Does the 10-year Treasury stay high? or move higher too? And now we've got another useful clue here. What is the two-year treasury

telling us about what the market expects from the Fed? Third, the dollar. Does it strengthen and add pressure to global financial conditions or weaken while commodities and international markets improve? Those aren't trading signals, they're clues. Because the biggest lesson I took from the dot-com era is pretty simple. You can be right about our technology and still be wrong about which investment wins next. The internet won, but market leadership changed. AIMA may change the world too, but that doesn't tell us which stock, sectors, or asset classes will give investors the best returns from today's prices. And maybe those NBA finals give us a perfect reminder.

In 1999, Spurs 4, NICS won. In 2006, Nix 4, Spurs won. Same teams, same stage, different winner. Markets can work that way too. History can rhyme, but it doesn't always have to pick the same winner. So instead of trying to guess one exact future, focus on whether your financial plan is built to handle more than one possible outcome. And if this discussion has you wondering how changing interest rates,

market leadership, inflation, or different investment cycles could affect your retirement plan, you can call Oak Harvest Financial Group to schedule a conversation about your financial plan. I'm Chris Paris with Oak Harvest Financial Group, Houston, Texas. Thanks for watching Stock Talk. All content contained with an Oak Harvest podcast expresses the views of the speaker and is for informational purposes only.

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