Billionaire Mark Cuban says “we are not in a technology bubble” (2024)

“We’re not in a tech bubble, and as far as similarities (with the dot-com era) go… none at all,” he said. told fortune via email.

Cuban, perhaps best known as the former majority and current minority owner of the Dallas Mavericks, has certainly shown that he is a good read of the effervescence of the markets and the tech world over the years. As FortuneDevin Leonard detailed in a 2007 article, Cuban sold two companies during the 1990s, and his timing was excellent both times.

At the beginning of that decade, at just 32 years old, Cuban became a multimillionaire after selling his company MicroSolutions, which sold and installed hardware and software, to CompuServe for $6 million. The sale came just before computer prices plummeted in 1991 due to an industry price war.

Five years later, Cuban and his partner Todd Wagner launched an Internet radio company that planned to broadcast sports games, called Audionet. The company later became a darling of the Internet age when it added video streaming and adopted the name Broadcast.com. Wagner said Fortune in 2007 how he and Cuban took advantage of the rapid technological progress and hype of the Internet era to strike a huge deal with then-dominant tech giant Yahoo. “We went to Yahoo and AOL, which we both knew very well, and said, ‘You’re either going to buy from us or you’re going to catch up,’” he said.

Their ploy worked and Broadcast.com was eventually sold to Yahoo for $5.7 billion in 1999, just before the dot-com crash the following year. But the thing is, in 2024, Cuban said he doesn’t see the same bubble-like events that prevailed today during the dot-com era.

Stock Market Missing Key Bubble Features

Despite being hit by rising interest rates and persistent inflation, the S&P 500 is up 27% over the past 12 months to an all-time high of more than 5,000 points. And while Wall Street calls the launch of generative AI apps like OpenAI’s ChatGPT a modern-day “gold rush” for investors, the tech-heavy Nasdaq Composite, which is typically more sensitive to higher rates, is up 38 %.

But Cuban, who just published a MasterClass detailing some of his top tips for entrepreneurs in the age of AI, said that despite the recent surge in stock prices, he doesn’t see many hallmarks of the dot-com era, and noted that “we are not seeing ridiculous things.” “Companies go public or raise money.”

Up to this point, the venture capital industry, which typically achieves explosive growth during market bubbles, has been quiet over the past year. As FortuneAs reported by Jessica Matthews, nearly 600 “unicorns” (private companies with a valuation of more than $1 billion) were minted in 2021 when interest rates were low and tech stocks were rising. But in 2023, despite the hype around AI, only 71 companies achieved unicorn status.

The IPO market, which also typically thrives during stock market bubbles, also faltered over the past year. After a record 397 companies went public in 2021, only 153 companies listed their shares last year, according to EY.

Several Wall Street analysts have also rejected the dotcom bubble narrative. In a note on Friday, Wedbush technology analyst Dan Ives argued that the current market is not giving “sky-high” valuations to companies with weak balance sheets and questionable business models. Instead, the winners of the AI ​​era have been companies like semiconductor giant Nvidia, which have demonstrated their ability to make more than healthy profits. “As someone who covered tech stocks during the Dot.com bubble/burst, in our opinion this is nowhere near the 1999/2000 period,” Ives wrote.

Still, doubts remain about the dominance of the tech sector (and even the optimistic valuations of the big tech giants) and that dates back to the dot-com era.

Market concentration remains a concern

In 1999, rising valuations of technologies based on the hype around the Internet led the technology sector to represent a record 33% of the S&P 500. Similarly, the technology sector represents about 29% of the S&P 500 today , according to US Bank Wealth Management. .

But market concentration in the age of AI goes beyond the technology sector. While big tech giants like Nvidia, Microsoft and Google benefit from the buzz around generative AI, the 10 largest companies in the US have begun to dominate the market, representing more than 30% of the S&P 500. These giant companies also They contributed approximately 70% of the index’s gains in 2023.

This concentration in the technology sector, and particularly in large technology companies, could represent a serious market risk this year, according to Maxime Darmet, senior economist at Allianz Trade in the United States, who warned in a February 8 note that ” highlights the dependence of a few. companies.”

Quantitative strategists at JPMorgan even warned in late January that the dominance of the top 10 stocks in the US market is reminiscent of the dot-com bubble, when these companies represented a record 33.2% of the MSCI USA index, which tracks 609 US mid- and large-cap companies.

“The key takeaway is that extremely concentrated markets present a clear and present risk to equity markets in 2024,” they wrote in a note to clients, according to Bloomberg. “Just as a very limited number of stocks were responsible for most of the gains in the MSCI USA, declines in the top 10 could drag stock markets down with them.”

Cuban said Fortune that market concentration is really the only risk he sees after ruling out other comparisons to the dot-com era. “Much of the market’s wealth is tied up in seven companies. All of whom compete at some level. Therefore, there are risks for those companies that could affect the entire market,” he warned.