Name: Last time this happened…The Stock Market Crashed
Uploaded: 2025-08-24T18:04:19.000Z
Duration: 16 min 47 s
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Last time something like this has happened, the stock market has crashed.

And every company that says that they are doing something related to AI, they are seeing their stock prices to go viral.

Investors are throwing money into that stock, imagining that this company is going to make a lot of money sometime in the future.

And a lot of people saying that the market has turned into one giant bubble, and if there is a bubble, bubbles turn to burst every time.

Look at Palantir for example, one of the most famous AI stocks that's out there.

Before 2024, nobody was talking about it.

It's probably one of the best investments somebody could possibly make.

And if you want to justify its earnings, then forget about that.

Look at Broadcom, prior to 2023, it wasn't trading that much.

I can confidently tell you that this was probably one of the best investments out there because there is a huge shortage of chips in the market, and if you want to power AI, then you certainly need a lot of very advanced chips.

Tesla also presents itself as an AI company, and over the last couple of years since AI became a stock, it has increased by 182 percent.

NVIDIA is, of course, the crown of the AI, and it has grown by 1200 percent since 2022 and became the world's most valuable company.

In 2022, I wouldn't have imagined that there is going to be a company that is worth about 150 billion dollars and will take over Apple that back in the day was the most valuable company in the world, and today NVIDIA worth over 4 trillion dollars.

That's why a lot of people are very concerned that this AI thing is turning into a bubble should we sell our stocks because the bubble, sooner or later, is going to burst.

In 2022, there was a massive stock market crash.

The stock market has crashed by about 25 percent.

A 25 percent is a massive crash in the market.

People have overpaid for a lot of stocks during 2020 and 2021, and then we realize that those stock prices are not being backed by very strong earnings, and if you are not making money, then you cannot justify those stock prices.

You see, when we look at the stock market, we always have to think like investors, and as investors, we don't look at the technology itself, even though that is also important to look at.

The most important indicator is how much that technology is earning us.

If you are making the best technology in the world, and it's not making money behind it, then why are we supposed to pay for that.

And that's why when a technology comes out, you have to think about how much that technology is going to make you.

And that's why when stock prices increase dramatically in 2021 and 2022, and then we realize that it's not being backed by earnings, the entire market has collapsed in order to justify the earnings.

When stock prices increase dramatically, there are two things usually happen.

Either it's backed by earnings, so earnings rise as well and stock prices stay the same.

But if earnings do not increase alongside stock prices, then stock prices go down and fall to the level in order to justify its previous earnings, or the current earnings in this case.

At its peak in 2020, PE ratio of the S&P 500 was at about 38, which is one of the highest in the history of the S&P 500.

It's not backed by earnings, investors massively sell their stocks, and by the mid of 2022, it goes to 19.

However, in November 2022, Chad GPT comes out and it changed the world.

It shocks the entire market, it shocks the entire tech industry, and the stock since then has grown by 50%.

And if you look at the PE ratios, the PE ratios have also grown from 19 up to 30.

And that means that this 50% growth that has been happening since the end of 2022 or the beginning of 2023 is not being backed by earnings.

And this is one of the fundamental reasons why a lot of experts warning us that it is turning into a bubble because it's not backed by real earnings.

On the other side, you have those people who say that earnings are going to follow sometime in the future because this technology has the potential to make those earnings.

However, investors today are paying for these stocks as if these companies have already made 100 times more than they are making today.

The best example of the bubble is Vistra.

This is pretty much a very traditional company that generates electricity.

When we have a very traditional company, especially when it's very capital-intensive because it needs to build those huge electricity plants to generate that electricity, we don't expect those companies to make a lot of money.

We don't expect these companies to dramatically expand all over the country or all over the world because the cost of expanding that business is extremely expensive.

Compare that to an internet company or a Chad GPT that can easily expand.

The more users you add to GPT, it doesn't cost as much as you have to open a new entirely power plant in order to provide electricity for dozens of more homes.

Up until 2024, the valuation of Vistra was very moderate at 10 billion dollars, and for such a company, its PE ratio should be at around 10 because we don't expect this company to make 100 times more money sometime in the future.

It's a very well-established traditional business.

For such companies, a PE ratio of 8, 9, or maybe 10 is very reasonable.

If it's a technology company that has a huge potential to grow, then we can actually give it a PE ratio of 20, 25, in some cases, maybe 30, but for this company, not that much.

However, at the end of 2023, there is a lot of news that the new databases are going to power the AI but to power those data centers, you need a lot of energy, and that's why a lot of investors started buying and investing in companies such as Vistra that provides electricity, and since then, the stock has grown by 756 percent.

No, its earnings are growing gradually like they supposed to be.

But because now people claim that Vistra is going to power the AI databases, a lot of people are investing in them, and this is not the only example.

The market today is filled with such examples.

In fact, the AI bubble today looks very similar to the dot-com bubble that happened in late 1990s.

In 1995, Netscape comes out and it changes the entire course of the history.

Internet existed way before 1995, but Netscape came out as a browser and made it accessible for the average person to use the internet.

Before 1995, it was very difficult to use the internet.

That's why after Netscape, you had a long list of internet companies that came out and changed the course of the history.

That's when a lot of investment, a lot of money started pouring into internet companies.

Companies such as Amazon and Google and a long list of other companies came out in 1990s.

Every company would add dot-com at the end of their name, and their stock price would grow dramatically after that.

But then by 2000s, people realized that we have such high stock prices, but these high stock prices are not being backed by very strong earnings, which means that these stocks are overvalued.

And very smart investors, especially those who bought those stocks very early, they started selling their stocks massively.

One of the people who became a billionaire as a result of that was Mark Cuban.

He had a lot of stocks since he sold his startup to Yahoo and he massively sold all of his stocks in the market because he knew that all of these internet companies, yes, they have very high valuations, but these high valuations are not being backed by very strong earnings.

By the year 2000, the bubble burst and the S&P 500 falls down by about 50 percent.

The real question is that, did internet overpromised and underdelivered?

Internet companies today make much more than anybody would have imagined back in 1990s.

You see, when a new technology comes out, there is a lot of hype around it, and a lot of people start throwing theories that these corporations or this technology is going to make an X amount of money, and maybe it will, maybe it will make even far more money than that.

But because everybody is focused to make money in the short run, everybody invests in them.

And that extra investment creates a lot of demand for these stocks, which hype their stock prices to levels that we cannot possibly imagine.

But then we realize that in order for these companies to justify those stock prices, they need time to develop that technology to the level where it's going to be profitable.

When that realization happens, early investors start selling their stocks massively and that's the bubble burst.

And then after that, these corporations will start working on how they can monetize this new technology, and that's when that technology becomes mainstream.

And that's what happened with the internet.

In fact, most of the internet companies that you know today did not even come out in 1990s, they came out after the bubble burst.

For example, tech google, it was founded in 1999, but it was a very little tiny company.

It only became mainstream after the bubble burst.

Instagram, whatsapp, pretty much most of the internet companies or technologies that you use today came up after the year 2000 or after the dotcom bubble burst.

The introduction of chatgbt looks very similar to the introduction of Netscape.

In November 2022, when chatgbt came out, everybody realized that AI is the next big thing.

Because everybody thought that you can literally put AI in the hands of the average person, just like Netscape put the internet in the hands of the average people.

So a lot of investments poured into AI, which drove all of these massive stock prices.

But the real question is that when that bubble is going to burst.

The bubble has been going for the last 2 years, like the entire 2023, 2024, and now 2025.

Maybe it will continue until 2026, maybe even 2027.

You cannot possibly time the market perfectly.

You can look for the clues, you can look for the indicators, but timing the market perfectly is almost impossible.

But there is a big difference between the dotcom bubble and the AI bubble.

When Netscape came out in 1995, the largest companies back in the days were Walmart, General Electric, Xenmobile, and all of these corporations did not jump into the internet.

They continued with their own business as if internet is just another thing that is going to fade away.

If Walmart, for example, invested in the internet, Amazon would not exist today.

If General Electric realized the potential of the internet and they would have developed, for example, a smartphone, then Apple wouldn't be the largest company in the world today.

Or one of the largest companies in the world.

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Last time this happened…The Stock Market Crashed

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