Once upon a time, actually it was during the second half of the 1990s, four companies so dominated the burgeoning internet that the result was unparalled interest from investors and therefore influence on the direction of the stock market, specifically the NASDAQ Composite. These four companies were Microsoft, Intel, Cisco Systems and Dell Computer. (We have replaced Dell with Oracle on the charts below as Dell took themselves private before listing again as a publicly traded company.) As the 1990s wore on, they became known as the “Four Horsemen.” As the charge below indicates if you had invested $10,000 in each of the four on December 31, 1995 you would have amassed a total of $427,920, nearly a ten bagger in a little over four years.
However, all good things must come to an end and as is indicated from the chart below, so did the bubble in the NASDAQ as shares of each sunk over the ensuing decade. In fact, Cisco Systems and Intel have yet to exceed their high set on February 20, 2000, almost twenty-five years ago.So, how does this reflect on today’s market environment? Well, to put it bluntly, we do believe that at some point in time in the future, investors will ultimately classify the appreciation in the share price of stocks even remotely associated with Artificial Intelligence (AI) as a bubble. That said, we do not believe that we are there yet – perhaps in the fourth or fifth inning of a nine-inning baseball game.But please, don’t think that diversification is only for the foolish. It is meant to help you walk through that door of financial independence and not go back out.
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