BlackRock Compares AI Bull Market to the 1990s Internet Bubble

Original author: Monday, Shenchao TechFlow

DeepInsight Summary: BlackRock’s latest report directly compares the current AI bull market to the 1990s internet bubble: U.S. tech stocks rose a cumulative 1,097% between 1993 and 1999, while AI-related stocks have gained 569% since 2019—half the previous surge. However, the S&P 500’s Shiller P/E ratio has returned to 40, matching the peak of the 2000 bubble, and tech stocks now account for over 37.5% of the U.S. market capitalization, surpassing their weight during the internet bubble.

BlackRock's conclusion is that AI is not a bubble, provided that profit growth materializes.

In its latest weekly commentary released on July 7, BlackRock directly addressed the market's most hotly debated question: Is AI a bubble?

The answer from the world’s largest asset manager is: what matters isn’t where valuations stand relative to history, but whether earnings growth can be sustained. Meanwhile, analyst Mike Zaccardi shared a data comparison chart from an internal BlackRock presentation on X, visually contrasting the internet bubble from 1993 to 1999 with the AI rally from 2019 to the present. Data source: Morningstar, as of June 30, 2026.

The bottom line: AI-related assets have risen a cumulative 569%, just over half of the 1,097% surge during the dot-com bubble. But more important than the rally’s magnitude is whether the underlying fundamentals supporting this surge are stronger than those of the past.

According to BlackRock, citing Morningstar data, U.S. technology stocks rose a cumulative 1,097% between 1993 and 1999, while the broader U.S. stock market increased by 292% over the same period. Technology stocks delivered an annualized return of at least 19.9% for seven consecutive years, reaching 78.1% in 1998 and 78.7% in 1999.

During the AI market cycle from 2019 to June 30, 2026, technology stocks delivered a cumulative return of 569%, compared to 237% for the broader U.S. stock market over the same period. The period included a significant drawdown in 2022, when technology stocks fell 28.2% for the year, followed by a rebound of 57.8% in 2023, gains of 36.6% in 2024 and 24.0% in 2025, and an additional rise of 19.8% in the first half of 2026.

The divergence between the two cycles is evident in the latter stages. During the final two years of the internet bubble, valuations accelerated sharply, with cumulative gains nearing 200% in 1998 and 1999. In contrast, the acceleration phase of the AI rally occurred in 2023 (following the low point in 2022), but annualized returns have since gradually narrowed. In other words, the pace of the AI rally has been more restrained than that of the internet bubble, yet market sentiment is increasingly divided on how far it still is from a speculative top.

The S&P 500's Shiller CAPE ratio has risen to 40x, reaching levels last seen during the dot-com bubble. This is a classic measure of long-term valuation overheating, calculated using the average inflation-adjusted earnings over the past 10 years. A ratio of 40x means investors are paying $40 for every dollar of long-term average earnings—a level rarely seen in history, last occurring around the year 2000.

But BlackRock notes that the 12-month forward price-to-earnings ratio provides a more balanced perspective, currently around 21x, making valuations appear less exaggerated, as earnings expectations have risen in tandem with stock prices.

S&P 500 second-quarter earnings are expected to grow year-over-year by 23%, marking the seventh consecutive quarter of double-digit growth. BlackRock emphasized that such earnings growth rates are extremely rare in history. Rick Rieder, BlackRock’s Chief Investment Officer, revealed at the CNBC CEO Summit on June 2 that the current P/E ratio of the Magnificent Seven tech giants is 26x, with expected earnings growth exceeding 30% (a combined growth rate of approximately 27.6%), while the S&P 500’s forward P/E ratio stands at 21x, with a one-year earnings growth forecast slightly above 20%.

The split between two indicators forms the core contradiction in today’s market: long-term valuation metrics have signaled a bubble, but short-term profit momentum continues to support high valuations.

According to Morningstar data, as of May 31, 2026, technology stocks accounted for 37.5% of the U.S. stock market’s total market capitalization, surpassing the levels seen during the late 1990s internet bubble. This figure does not include Alphabet and Meta, classified under communication services, or Amazon, classified under consumer discretionary—companies deeply involved in AI. When these major AI-focused giants are included, the actual concentration is even higher.

Market leadership is shifting from the "Mag 7" to a broader group of AI beneficiaries. A new market acronym, "MANGOS," has emerged, representing Meta, Anthropic, Nvidia, Google, OpenAI, and SpaceX. The Morningstar Global Next-Generation AI Index rose approximately 45% cumulatively in April and May 2026, before declining in June.

Concentration risk is one of the most striking similarities between today’s market and the internet bubble. At the end of 1999, a handful of companies—such as Cisco, Intel, Microsoft, and Oracle—dominated the final surge of the Nasdaq. Although today’s AI leaders are far more profitable than their counterparts back then, a failure to meet expected earnings growth could still trigger a similar rush to exit concentrated positions.

BlackRock offered a thought-provoking statement in its weekly commentary: concluding that AI has become a bubble is itself a significant judgment, as it assumes that AI technology will not deliver lasting productivity and growth breakthroughs.

BlackRock believes that AI offers the potential for a "permanent growth breakthrough" by accelerating innovation, but the investments required to build the future are intensifying scarcity. Based on this, BlackRock’s mid-2026 outlook focuses on three themes: AI scarcity (bottlenecks in power, grids, chips, and data centers), durable income (short-duration credit assets), and thematic investing beyond traditional asset classes.

BlackRock maintains an overweight stance on U.S. equities, favoring scarce inputs required by AI systems.

But the counterarguments are equally clear. Morningstar’s latest market brief notes that the concentration of technology stocks in the U.S. market has surpassed levels seen during the dot-com bubble, with concerns over high interest rates, elevated valuations, and overinvestment in AI intertwining. Fidelity’s research highlights that the current ratio of capital expenditures to free cash flow is below 1, indicating that companies are primarily funding AI investments with their own funds rather than through debt—a stark contrast to the dot-com bubble era, when this ratio approached four times higher.

For investors, the core question has shifted from "How much can AI stocks rise?" to "How long can AI profit growth be sustained?" BlackRock is betting on profit realization, while skeptics are betting that profits have peaked. The earnings season in the second half of 2026 will be a critical window to test these two views.