Are we on the brink of another dot-com bubble, but this time fueled by AI and tech stocks? The parallels to 1999 are striking, and it’s leaving investors wondering: is the rally over, or is there more room to run?
By Cam Hui
The Federal Reserve’s potential rate cut in December could spark a short-lived 'risk-on' frenzy, but don’t get too comfortable. And this is the part most people miss: while many believe AI stocks are already in bubble territory, the timing of its burst remains anyone’s guess. The prospect of Fed easing and short-term technical shifts might just give growth stocks a temporary lifeline.
Take Nvidia (NVDA), the AI market leader, for instance. Despite reporting stellar quarterly results and CEO Jensen Huang touting 'off the charts' demand for its Blackwell chip, the stock’s rally was short-lived, closing in the red. But here’s where it gets controversial: does this signal the end of the AI and tech boom, or is it merely a pause before the next surge?
To answer this, I dove into market leadership rotation using Relative Rotation Graphs (RRG charts). These tools map sector shifts across four quadrants: leading, weakening, lagging, and improving. Right now, the S&P 500 sectors show a peculiar pattern—no sectors are in the leading quadrant. Technology, once dominant, has moved to the weakening quadrant. The question is: will it rotate further into lagging territory, or could it swing back to leadership?
In the 'improving' quadrant, energy, healthcare, and utilities are emerging as unexpected contenders. But here’s the twist: utilities, often seen as defensive, are now tied to AI’s rising electricity demand. Should their strength be read as a bullish sign for AI, or is it a bearish indicator of market caution? Healthcare, meanwhile, is rebounding from a multi-year slump, but its short-term price action looks overextended. Energy, though promising, hinges on oil prices, which are teetering near critical support levels.
From a factor perspective, value and fundamentally driven factors like large-cap value, quality, and dividend growth are taking the lead. In contrast, high-momentum, speculative growth, and high-beta factors are lagging. This suggests a market correction could be on the horizon—but is it inevitable?
Zooming out, equities are weakening globally, except in emerging markets (excluding China). Commodities, gold, and bonds are stealing the spotlight, partly due to the U.S. dollar’s recent weakness. And this is the part most people miss: the Fed’s December decision could be the wildcard that reshuffles the deck. With market odds of a rate cut climbing to 70%, will it reignite growth stocks or deepen the rotation into value?
Analyst Jurrien Timmer draws a compelling analogy to the dot-com era, suggesting we’re in early 1999 territory. But here’s where it gets controversial: while the current market mirrors the past, the returns aren’t as extreme. Does this mean the AI bubble still has air, or are we closer to the pop than we think?
What do you think? Is the AI and tech rally finished, or is this just a pause before the next surge? Share your thoughts in the comments—let’s debate!
Cam Hui writes the investment blog Humble Student of the Markets, where this report first appeared. He is a former equity portfolio manager and sell-side analyst.
More: Why the once-invincible Nvidia can’t save the AI trade
Also read: A Fed rate cut in December seemed doubtful. Here’s why it’s now likely to happen.
-Cam Hui
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11-24-25 1922ET
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