Market Insights: Dotcom Bubble vs. Now 🫧

🔮 What can the recent tech rout tell us about the future of the market? 

Some are calling it a “bloodbath.” Others warn that a bubble is bursting. 

Many have pointed to the steep sell-off in software stocks in recent days as evidence that the long-feared AI bubble is about to pop. The iShares Expanded Tech-Software Sector ETF (IGV) is down almost 20% over the last month while the broader market has not experienced a sell-off. 

But looking at the data, reality seems to be a lot less dramatic… and more nuanced.

This week's Market Insights is a 6 minute read! Full article here

Quote of the week

"Those that fail to learn from history are doomed to repeat it."

Winston Churchill

What Happened In The Markets This Week?

Here’s a quick summary of what’s been going on:

📦 Tariff-related customs bond gap hits record US$3.5 billion (CNBC)

• What happened: U.S. Customs identified 27,479 bond insufficiencies in fiscal 2025 totaling nearly US$3.6 billion, a record level linked to higher tariffs under President Trump’s trade policies. Importers must increase their customs bonds to cover rising duties before their goods can be released.

• How it impacts investors: Higher tariffs are tying up more cash for import-heavy businesses, increasing working capital needs and financial strain. That can pressure margins and create added volatility in sectors exposed to global trade.

• Next steps:  Use our Discover page on Simply Wall St to explore sectors most exposed to trade policy shifts, including industrials, retail, and logistics.

💄 Estée Lauder takes Walmart to court over alleged fakes (CNBC)

• What happened: Estée Lauder sued Walmart in California federal court, alleging counterfeit versions of its beauty brands were sold on Walmart.com by third-party sellers. Walmart said it has zero tolerance for counterfeit goods and will respond in court.
  

• How it impacts investors: The case highlights the risks that come with large online marketplaces, especially those relying on third-party sellers. It also shows how brand protection can become a legal and reputational issue for both retailers and consumer companies.
  

• Next steps: Use our Consumer Staples industry overview to compare profitability, brand strength, and risk factors across global beauty and retail stocks.
  

To see our take on these market stories below, simply check out the full article!

• ✈️ Expedia’s B2B growth gives it a boost in Q4

• 🪙 Coinbase slips into a Q4 loss as crypto prices tumble

• 🚢 Fincantieri sees defense demand powering long-term growth

Now let’s dive into the main piece.

🧐 Is there a bubble bursting?

Last year, multiple analysts raised alarm bells, saying that the surge in AI stocks were starting to raise "bubble" signals – similar to the Dotcom Bubble 25 years ago.

We looked into that theory... but when we zoom out to look at the entire market, it seems to be a different picture that has little resemblance to the bubble that burst in 2000.

Today’s multiples are largely supported by strong earnings. In contrast, the Dotcom Bubble was the result of great expectations without the backing of any fundamental business value. Forward PE ratios surged from 1995 to 2000. Meanwhile, today's forward PE multiple is almost unchanged from where it was in 2020.

Sector Performance - Reuters 

💸 The market is rediscovering non-tech sectors

The sell-off we're seeing in tech stocks today is something more complicated than rising multiples. We are seeing a shift in market leadership as the long-standing dominance of the tech sector begins to fade.
 
Since October of last year, healthcare and industrial stocks have outperformed the S&P 500, while technology shares have lagged.

This matters because tech had been a near-default winning strategy for years. Since the fourth quarter of 2025, the equal-weight S&P 500 has gained 5%, compared with just 1% for the tech-heavy, market-cap-weighted version.

That divergence suggests performance is broadening beyond a handful of mega-cap tech names and that success now depends more on selective positioning.

The recent tech pullback has sparked familiar fears about bubbles and busts.

But beneath the headlines, the data tells a more complex story about earnings strength, sector rotation, and how AI is reshaping market leadership.

Our full article covers:

🧠 Why today’s market doesn’t resemble the Dotcom era, with valuations still grounded in real earnings growth rather than speculation.

🔀 How leadership is broadening beyond mega-cap tech as other markets quietly gain momentum.

⚙️ What’s driving the sharp divide between software and semiconductors and whether fears around AI disruption are justified.

📊 Where investors might find opportunity amid the volatility from selectively beaten-down software names to more diversified exposure.

💬 Join the discussion by leaving a comment!

Do you think we'll see tech stocks fall some more over the coming weeks?

Key Events During the Next Week

Monday

• 🇺🇸🇨🇦 Markets in the U.S. and Canada will be closed for Presidents/Family Day.

   

• 🇨🇳 Markets across China will have some days of the week closed in celebration of Lunar New Year – each exchange has their own schedule.

Wednesday

• 🇨🇦 Canada Inflation Rate YoY (Jan)

  • 📈 Forecast: 2.5%, Previous: 2.4%

  • ➡️ Why it matters: Inflation drifting higher could delay rate cuts from the Bank of Canada. A softer reading would give policymakers more room to ease and support equities.

• 🇬🇧 UK Inflation Rate YoY (Jan) 
  • 📉 Forecast: 3.0%, Previous: 3.4%
    
  • ➡️ Why it matters: Inflation remains above target in the UK. A meaningful slowdown would ease pressure on the BoE, while stubborn inflation keeps rates higher for longer.

Friday

• 🇯🇵 Japan Inflation Rate YoY (Jan)

  • 📉 Forecast: 1.9%, Previous: 2.1%

  • ➡️ Why it matters: Japan’s inflation trend influences expectations for Bank of Japan policy shifts. Sticky inflation increases the chance of policy tightening, which can impact global bond markets.

Earnings season continues with the following companies set to report next week:

• Alibaba Group (BABA)

• Booking Holdings (BKNG)

• Carvana (CVNA)

• Walmart (WMT)

• Warner Bros Discovery (WBD)

• Airbus (AIR)

Until next week, invest well.

Simply Wall St