Global markets are unlikely to repeat the excesses of the dotcom crash, Barclays strategists say, despite some parallels being drawn between today’s artificial intelligence boom and the tech bubble of 2000.
Ajay Rajadhyaksha, Global Chairman of Research at Barclays, believes that “fears about the AI narrative stumbling are overdone, even if valuations are admittedly full.”
“We think there are far more differences than similarities to the 2000 episode,” he added in a Thursday note.
Rajadhyaksha pointed to stronger fundamentals across balance sheets, profitability, and cash generation among today’s tech leaders compared with the telecom and internet firms that dominated two decades ago.
He noted that equity markets have been “melting up” in recent months, with U.S. and Chinese tech giants leading the charge. Google has surged 25% in a month, Oracle jumped more than 20% on earnings, Tesla has added a third to its market cap since September, while Alibaba has rallied more than 30%.
Japan’s Nikkei has also touched new highs.
Rajadhyaksha acknowledged concerns about slowing U.S. job creation and persistent weakness in China’s property sector, but said other indicators suggest resilience. He described the U.S. economy as having entered a “no-hire, no-fire” phase, with job creation hampered more by supply constraints than collapsing demand.
Most other activity data remain supportive, with retail sales growth, a strong services sector, and GDP tracking above 3% for the third quarter.
China’s old economy is still under strain, with property investment and sales in sharp decline. But the country’s high-tech sector is performing strongly, and the government’s “anti-involution” campaign has helped stabilize prices and ease competitive pressures.
The euro area, meanwhile, has proven more resilient than expected, with growth holding near trend and inflation pressures easing. Still, Barclays cautioned that Europe is lagging both the U.S. and China in AI adoption, and the gap could widen in the coming years.
Barclays expects global GDP growth of 3.1% in 2025 and 2.8% in 2026, with the positives outweighing the negatives. It sees S&P 500 earnings growth of 6–8% this year and another 10% in 2026, underpinned by AI-driven strength.
Rajadhyaksha sees further Federal Reserve rate cuts and continued AI investment as a “powerful one-two combo” for risk assets. Barclays strategists remain overweight global equities versus fixed income, with U.S. stocks likely to outperform Europe into year-end.
At the same time, Rajadhyaksha flagged fiscal risks in large developed economies, including the U.K., France and Japan, where long bond yields have risen on deteriorating debt profiles. Political upheaval adds to the uncertainty, but he does not expect a global bond market meltdown.
“The world economy might be a study in contrasts for now,” he concluded. “But we expect the positives to outweigh the negatives in the coming months.”
Source :
https://www.investing.com/news/stock-market-news/barclays-sees-far-more-differences-than-similarities-to-the-2000-episode-4255219
