The tech-heavy Nasdaq stock index inched above 4,000 on Tuesday for the first time since September 2000, when irrational exuberance for technology companies was collapsing beneath its own weight, the victim of its own high hopes Silicon Valley-style. Yet while some veterans of the last boom and bust worry that the nosebleed valuations for Twitter and Tesla mean another tech bubble is brewing, the Nasdaq's rise feels much different this time around.
"Back in the dot-com days, you could get startup funding with a business plan written on the back of an envelope," said Gartner analyst and seasoned valley watcher Van Baker. "That's not true anymore. VCs are much more prudent and rational, and the number of startups that get funded is still a small percentage of what we saw back in 1999. I'd say what's going on with Nasdaq right now just means that tech stocks are enjoying the same surge the rest of the economy is seeing."
Another huge difference between then and now is the speed and ferocity with which stock prices were climbing as the last century drew to a close. The Nasdaq first closed above 4,000 on Dec. 29, 1999, less than two months after it had reached 3,000. Over the course of that year, the index had nearly doubled, gaining 85.6 percent. But it hadn't yet run out of steam: the Nasdaq took less than three months to cross 5,000, gaining 25 percent in fewer than 50 sessions and closing at an all-time high of 5,048.62 on March 10, 2000.
While the Nasdaq's growth so far this year is impressive, it hasn't come close to matching its earlier, and ill-fated, performance: After Tuesday's 0.6 percent gain to 4,017.75, it's up 33.1 percent for the year.
"Things are much more muted today from a growth standpoint," said Brian Marshall, an analyst with ISI. "Back then, we were on a high floor, with companies projecting annual revenue growth of 20 and 30 percent forever. So when we fell, it really hurt. Today we're only on the first or second floor.''
The difference between the two periods also shows in the disparate performances of recent valley IPOs. At the end of the last millennium, technology companies with questionable business models and sketchy prospects were arriving on Wall Street to huge valuations and fanfare seemingly across the board. Now, while Twitter and a host of enterprise-software companies have found resounding demand for early shares, Silicon Valley companies such as Violin Memory and Chegg have experienced far less of a welcome on Wall Street, with investors unwilling to pay close to the prices commanded in their initial public offerings.
The Nasdaq, which dropped from its peak all the way to 1,108 on Oct. 10, 2002, is not the only index hitting milestones lately: The Standard & Poor's 500 index closed above 1,800 for the first time Friday, while the Dow Jones industrial average reached its first finish above 16,000 the day before.
The Nasdaq's most recent gains owe a lot to the big-cap tech stocks that pushed the index late last week, along with retailers and homebuilders who on Tuesday were among the best performing sectors, thanks to stronger-than-expected earnings and robust housing market data.
Still, like the last bubble, there's plenty of money being made. Shares of luxury jeweler Tiffany jumped 7 percent to $88.02 and was the S&P 500's top performer after the luxury retailer's third-quarter sales topped expectations.
To Gary Bradshaw at Hodges Capital Management in Dallas, that can only mean one thing.
"The wealth effect," he wrote in a note to investors, "because the stock market has gone up has definitely helped the upper-end folks."
Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/jowens510.