In trading rooms and investment houses, a concerning analysis is gaining ground, pointing to a precise parallel between the two most formative moments in modern technology history: the emergence of the Internet GUI (Netscape) in 1994, and the rise of Generative AI (ChatGPT) in late 2022. The graph comparing the reaction of the Nasdaq Composite index during the two periods provides food for thought regarding the growth potential and inherent risk of the current technological wave.

The Netscape Analogy: A Model for Transformation

The parallel between the two events is not accidental. Netscape, as the browser pioneer, marked the moment the internet shifted from an “academic tool” to an “accessible global platform.” ChatGPT, similarly, represents AI’s shift from a “research tool” to an “accessible technology that changes business models.”

Upon examining the data, the initial phase (742 days) shows an almost identical growth path: the Nasdaq index during the Netscape period rose by 122.3%, while the current AI wave recorded a very close increase of 109.31%. This parallel suggests that the market is currently pricing in the revolutionary potential of AI with the same level of certainty and enthusiasm with which it priced in the potential of the internet in the 90s.

The Exponential Expansion: The Troubling Lesson of 1998

The strategic question for investors now is not whether the Nasdaq will continue to rise, but at what pace. In the historical graph, it can be seen that after two and a half years of steady growth (amounting to about 150% in both periods), the Nasdaq index in the Dot-Com wave entered an unprecedented parabolic surge. Within just about two years (1998–1999), the index jumped from a cumulative 150% gain to a peak of over 400%, preceding the major crash.

Market sentiment today, driven by AI and chip companies, is very similar: there is excessive optimism regarding the possibility that current investments will lead to exponential growth in profitability. The rising multiples of the major technology giants, which reflect this valuation, raise the danger that we are on the verge of a second phase of a technology bubble—this time fueled by AI.

Conclusion: Risk Management in the Age of the Nasdaq Echo

The dramatic parallel in the Nasdaq’s trajectory serves as a double-edged sword: it confirms that the market believes AI is a transformative event on the scale of the internet, but it also serves as a stark reminder of the risk.

From a risk management perspective, investors today are required to examine whether the growth in profitability of technology companies will truly justify the parabolic pace recorded between 1998 and 1999. If revenues and earnings do not grow fast enough, or if the Federal Reserve acts in a way that harms market liquidity, this path could end similarly. While financial history teaches that “history repeats itself,” as noted in the chart, past performance is no guarantee of future results.