AI Stocks and the New Tech Cycle: Lessons From Past Booms and Busts

https://global.morningstar.com/en-eu/markets/ai-stocks-new-tech-cycle-lessons-past-booms-busts

Publish Date: 2026-02-20 12:50:00

Source Domain: global.morningstar.com

Technological Change Complexity: The AI boom highlights the immense challenges of identifying ultimate winners, emphasizing that technological progress doesn’t guarantee market rewards. Despite genuine innovations, outcomes are difficult to predict and navigating through this complexity requires patience and a long-term investment strategy.
Historical Parallels: The current AI market tumult mirrors the dot-com boom, where exuberant expectations often led to significant market disruptions. Even with sound structural insights, quick shifts in market narratives and competitive dynamics can cause sharp, unexpected reactions.
Market Volatility and Investment Lessons: Episodes such as the DeepSeek volatility and the software selloff triggered by Anthropic’s new AI model illustrate the intense market volatility inherent in periods of rapid technological change. These events underscore the necessity for a diversified approach and caution against trying to pick short-term winners, as complexities and costs involved often outweigh potential benefits.
Emphasis on Adaptation: Just as established firms during the dot-com era managed to adapt and integrate new technologies into their business models, the same adaptation principle likely applies in AI. Companies’ future success will depend on how they integrate AI into their products and strategies, even amid market volatility.
Uncertain Payoffs in AI Investment: Unlike the dot-com bubble, AI today involves extraordinary capital investments and is still uncertain in its payoffs. This investment frenzy coupled with high price volatility suggests a need for a cautious, patient approach, acknowledging both AI’s transformative potential and the uncertainty around its future benefits.