Since markets rebounded after the COVID-19 crisis, a handful of U.S. mega-cap stocks have driven much of the global equity rally. These stocks have stumbled in 2025, however. The Magnificent 7 stocks, on average, fell 15.5% in the year to date through March 18, 2025. This pullback coincides with the 25th anniversary of the dot-com bubble’s peak in March 2000. On the surface, the parallels between then and now are striking. In both periods, transformative technologies — the internet in 2000 and artificial intelligence (AI) in 2025 — have fueled outsized gains for a few dominant firms amid market euphoria.
The key question for equity investors: Will history repeat, or does today’s AI-driven market stand apart? In this blog post we compare the risk, return and fundamental characteristics of the U.S. market and its top-performing stocks across the two eras and highlight main differences and similarities.
The dot-com bubble followed five years of exceptionally strong U.S. equity performance. From 1995 to 1999, the MSCI USA Index surged 29.7% annually, far above the long-term annualized average of 10.7% between 1970 and 2024. In contrast, from 2020 through 2024, returns have averaged 14.6% — elevated, but modest compared to those of the dot-com era.
Exceptional market performance in the five years before the peak in March 2000
The market in 2000 may have delivered higher returns but it was also more volatile. According to the latest MSCI USA Equity Factor Model, projected market risk stood around 20% throughout February 2000, compared to approximately 15% in February 2025. The earlier period saw heightened volatility driven by the Asian financial crisis, Russian default and Long-Term Capital Management hedge fund collapse, all of which contributed to prolonged elevated risk. More recently, equity markets have navigated COVID-era shocks and subsequent interest rate hikes, though market volatility has since subsided.
Volatility forecast of the US equity market
Both eras share a common feature: the dominance of technology stocks. Companies in information technology and communication services (or its Global Industry Classification Standard (GICS®)[1] predecessor, telecommunication services) account for around 40% of the U.S. equity market by market cap in both periods. The trajectory of technology stocks’ rise differed, however. In 2000, their index weight nearly doubled within just 20 months, before plunging by half over a similar time span. In contrast, the expansion after the 2008 global financial crisis took a brief dip in early 2022 before surging again following the release of ChatGPT.
Market concentration in technology stocks at all-time high in the US equity market
The rapid ascent of technology stocks during the dot-com era also led to a higher concentration of returns. In the two years leading up to the March 2000 peak, technology stocks accounted for 74% of market gains, adding USD 2.3 trillion in market cap. In comparison, while today’s market is also concentrated — technology stocks have added USD 10.6 trillion in market cap over the past two years — they represent a smaller share of total gains at 56%. Similarly, the top 10 return-contributing stocks accounted for 67% of total gains in 2000, versus 53% in 2025.
Performance contribution of the top 10 stocks, and technology stocks, to the MSCI USA Index
Last, the more gradual buildup of today’s market may reflect stronger fundamentals. On average, today’s leading firms are more profitable compared to their peers than their dot-com counterparts were to the index average and have more robust top-line revenue growth. Furthermore, analysts project stronger ongoing expansion for these companies compared to forecasts for internet companies in 2000. As a result, relative valuations based on earnings growth stand below the extremes reached during the dot-com peak. When comparing the multiples to growth via, for example, the PEG ratio or we look at factor-based valuations over time, the valuations appear less overheated. Additionally, while the most prominent names in 2000 often dominated trading volume (the “high trading activity-growth” cohort), many of today’s technology leaders are not the most heavily traded stocks relative to their market capitalization. Lower relative liquidity could amplify future market swings if sentiment deteriorates.
Comparing the characteristics of today’s top performers to those of the dot-com era
Will history repeat or simply rhyme? Twenty-five years ago, the dot-com bubble burst as valuations soared when too few internet companies had viable paths to profitability and saw capital dry up. Too many growth projections ultimately proved to be a mirage. However, our analysis suggests that, despite the prevailing market enthusiasm, the 2025 rally is more measured. The rise of technology stocks has unfolded over a decade rather than in a rapid surge, and the disconnect between earnings and delivered growth has been more contained. Many leading AI stocks are established technology giants with highly profitable business models and strong competitive positions in their business segments. Even so, current valuations remain elevated, reflecting expectations of strong future revenue growth that must significantly exceed the ongoing heavy investments in personnel, chips and data centers.
The authors thank Anil Rao and Stuart Doole for their contributions to this blog post.