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Tech companies added .com to their names and watched their valuations soar.
It took 15 years for theNasdaqto recover its previous high, finally crossing above 5,048 in March 2015.
The S&P 500 only sustained its recovery after 2012.
That much was obvious.
But no one knew exactly how it would do so.
That should sound eerily familiar, amidst all the hype around artificial intelligence.
That doesnt mean every AI company will survive.
Many companies are jumping on the bandwagon, adding AI to their branding just to attract investors.
Many or even most of them will crash and never come back.
That led to outlandish price/earnings (P/E) ratios.
And those were real companies with significant tech advantages and earnings.
They survived, unlike many of their competitors.
Hype cycles always end in reality checks, explained Fei Chen, investment strategist atIntellectia AI.
And millions of investors lost huge amounts of money on them.
This is exactly whats happening now with AI.
Buy exchange-traded funds (ETFs) in the sectors you think will come out ahead.
Individual companies can rise and fall, and the fund will simply swap in the current performers.
Of course, the best time to do that is before industry hype takes hold.
In todays market, Chen recommends sticking to broad diversification beyond tech.
During the early 2000s, investors who invested heavily in tech lost their wealth, he said.
Most of the losers were either dead or dying.
The right time to buy was when the mood was sour and the press was negative.
Technology can change quickly and companies with a lead can quickly wind up behind, Zacks said.
Look for the leaders when the dust settles after the post-mania crash.
They reined it in by raising interest rates.
Back in the Dot Com era, rates were rising, too.
The market ignored it until it couldnt anymore, and we have the same setup now.
Granted, the present never matches the past exactly.
Many AI companies today do generate real revenue, and some are more mature tech companies.
Investors who fail to learn from history are doomed to repeat it.
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