Why Today’s AI Leaders Look Nothing Like the Dot-Com Era’s

Hi everyone – It’s Terry Gardner from C.J. Lawrence, a division of Apollon Wealth Management, coming to you from Midtown Manhattan. I wanted to weigh in today on a debate that’s been playing out in the market: how does the current environment compare to the fiber build-out of the late 1990s?

Revisiting the valuation case

A couple of months ago I put out a video comparing valuations across three periods: December 2025, the Nifty 50 era of the 1960s, and the internet bubble of the late 1990s. My take then was that there really wasn’t much of a comparison. The financials behind today’s market leaders looked nothing like the leadership or the valuations of those earlier eras. This environment was simply more benign from a valuation standpoint.

I also made the point that a lot of the market’s marquee names in late 2025 and early 2026 were trading at P/E multiples I considered fairly modest — high 20s, maybe low 30s — while the broader market sat around 22 times. For companies putting up real, premium growth in earnings and sales, that seemed like a small price to pay.

Since then, I believe that picture has only gotten better. Earnings kept growing, and with some rotation out of certain sectors into others, the valuations on that former leadership group look even more attractive to me today than they did back then.

Where the numbers stand heading into 2027

We’re coming up on second-quarter earnings season, which is when analysts typically start looking ahead to next year’s numbers to set price targets. Running the 2027 estimates now, here’s where things sit:

• Alphabet: 23.5x forward earnings
• Amazon: 23x — among the lowest in recent years
• Microsoft: 17.7x on 2027 estimates
• Meta: 16.2x, a low we haven’t seen in years
• Nvidia: 15.7x on 2027
• Broadcom: 17.8x

These continue to be among the larger companies exhibiting strong earnings and revenue growth, and they’re trading at multiples we haven’t seen from them in a long time, if ever.

The debate: are they overspending?

The question everyone’s wrestling with is whether these companies are spending too much building out the infrastructure for AI and agentic AI, and the power needed to run it. On the other side of that coin are the companies benefiting from all that capital spending. Are they exposed if the spending eventually slows down?

Our view is that we’re still early. Capacity constraint is really the whole issue right now, and nobody has a clear picture of when supply catches up with demand. I haven’t seen anyone lay out a credible timeline for that. Our current belief is that the build-out is likely to continue, and that somewhere in the next three to five years, supply and demand start to find their balance.

Who’s really leading this

What I keep coming back to is: who are the people steering this, and is it worth investing alongside them? Today that list includes Satya Nadella at Microsoft, Sundar Pichai at Alphabet, Jensen Huang at Nvidia, Mark Zuckerberg at Meta, Hock Tan at Broadcom, and Andy Jassy at Amazon.

Say what you want about that being a cliché thing to point to, but these are people who’ve run their companies through real market cycles and product cycles, and have proven themselves as leaders and as visionaries. I’m not looking to bet against them now.

Looking back at the 1990s fiber build-out

Now, let’s compare that to the dark fiber period of the ’90s, since that’s the comparison people keep drawing.

I was actually an analyst back then, covering transportation stocks, right around when Netscape gave the public its first real taste of the internet. Back then, traffic ran over copper phone lines owned by the big telcos — the AT&Ts of the world. As the internet took off, there was a scramble to get more broadband into the hands of businesses and consumers so data and commerce could move faster.

The scramble really took off after the Telecommunications Act of 1996, which forced the companies that owned the infrastructure to lease it out to other service providers. So if you wanted to start a telecom company, you could go lease fiber from AT&T and sell service to customers. It set off a gold rush — companies leasing fiber, building fiber, buying fiber, all of it. A whole new industry sprang up around it.

Everything had an acronym back then. The incumbents were ILECs. The new guys competing with them were CLECs. Out in the more rural markets, you had RLECs. There was a wave of IPOs and debt deals tied to this whole “fiber ecosystem” — names like WorldCom, Qwest, Winstar Communications. Even Enron jumped in, launching Enron Broadband. Computer Associates was handling a lot of the connectivity behind it all.

The leadership problem

Here’s where the two periods really diverge. A lot of the people running those companies back then were either inexperienced or, in more than a few cases, outright bad actors. Their conduct is a big part of why that whole industry eventually came crashing down.

Bernie Ebbers at WorldCom is probably the name most people remember. He was convicted on multiple felony counts, served 13 years of a 25-year sentence, and died not long after being released due to illness. His CFO, Scott Sullivan, pled guilty to fraud, testified against Ebbers, and did five years in federal prison. Qwest’s CEO, Joe Nacchio, was convicted of accounting fraud and served six years. Jeff Skilling, who ran Enron and started Enron Broadband, was convicted on multiple felonies and spent 12 years in prison. At Tyco, CEO Dennis Kozlowski and CFO Mark Swartz — who’d been cross-selling between subsidiaries and double-booking revenue — were found guilty on 22 counts, including grand larceny, securities fraud, and falsifying business records, and were paroled after eight years. And Sanjay Kumar, the so-called visionary behind Computer Associates, pled guilty to securities fraud and obstruction of justice and served 12 years.

I could keep going. There were legitimate businesses built during that period too, and some of them survived, or merged into what’s now part of the broadband backbone we use today. But there were also a lot of bad actors sitting in important leadership seats at the companies driving that build-out, and that’s a big part of the story.

Why this time looks different

That’s really the contrast I wanted to draw. I don’t think today’s leadership looks anything like that group, in valuation or in track record. There will be twists and turns ahead in this AI build-out — questions about return on capital, delays, new competitors, all of it — and sentiment on individual names will swing in and out of favor along the way.

My expectation, though, is that a lot of today’s leaders end up being the winners several years from now, too. Historically, many investors have favored investing alongside companies that have strong leadership and durable business models, and I think we’ve got a strong group to choose from right now.

If you want to dig deeper into the valuation numbers, head over to cjlawrence.com — you can find the December video and the underlying analysis there.

Please reach out if you have questions, I’m always happy to hear from you.

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