Many believe AI stocks are trading in a valuation bubble reminiscent of the dot-com era. We see it differently.

The chart above shows the valuation gap between TMT stocks (blue line) — home to many of today’s supposedly “inflated” AI names — and non-TMT stocks (green line) over the past 30 years. The spread has clearly widened over the past decade, but it’s nowhere near the extremes seen in the late 1990’s.

We took the analysis a step further by comparing the valuations of leading tech giants across both periods. What we found is that today’s 20-30x multiples look remarkably tame next to the 70x-plus frenzy of the pre-bubble era.

This exercise helps frame our current thinking — less “let’s wait for the pullback because things look too pricey” and more “can you believe we need to pay a modest premium in order to participate in what may be the next industrial revolution?”