The last time a generational tech bubble burst, the average stock still made money.
That’s one lesson of the dot-com bubble worth remembering as Wall Street continues to circulate fears of an AI crash. If that does happen, history says mega-caps take the worst of it.
From the end of 1999 through the end of 2001, the S&P 500 Equal Weight index returned more than 5% including dividends, according to data from Bespoke Investment Group.
Over the same stretch, the market-cap-weighted index lost about 20%.
That means investors who owned every company equally came out ahead while the tech-heavy index sold off.
A smaller version of this divide played out over the last week.
The S&P 500 fell 0.47% while the average stock in the index gained about 1%.
The biggest names in the market dragged down the entire index, with Meta and Alphabet down 9% and 6%, respectively, and Nvidia, Microsoft and Broadcom also declining.
That actually flipped the race for 2026 that’s gone back and forth since summer. The equal-weight index is now up 13% this year against the S&P 500’s 11.4%, a narrative change after mega-caps pulled ahead in September.
But as much as leadership seems to be widening once again, a real market crash would have broad collateral damage. The equal-weight index fell roughly 19% in 2002 once the bear market expanded beyond tech stocks.
And this week investors will have plenty of reason to get jittery:
Wednesday: Alphabet and Microsoft report earnings and the Fed announces its policy decision
Thursday: Amazon reports earnings
None of this is supposed to be taken as a sign to dump mega-cap tech before earnings.
But it does suggest that owning the rest of the market has historically softened the blow when tech falters.
Elsewhere
🤖 Amazon's cloud capacity is largely sold out through 2027. CEO Andy Jassy said a good chunk of 2028 is spoken for too, even after Amazon earmarked about $220 billion for capital spending this year. (Reuters)
📊 Most companies are beating profit estimates by slim margins. Of the 24% of S&P 500 companies that have reported third-quarter results, 83% topped profit estimates, above the five-year average of 78%. In aggregate, earnings came in 2.1% above estimates, below the five-year average of 7.5%. (FactSet)
📉 Goldman Sachs cut its Kospi target by 25%. Strategists lowered their 12-month target to 9,000 from 12,000 after the index fell more than 35% from its June peak, though the new target still implies more than 60% upside. (Investing.com)
Full Signal
Stephanie Aliaga is a global market strategist at J.P. Morgan Asset Management who focuses on AI.
We discussed why the AI boom is still early, the selloff in neocloud stocks, hyperscaler moats and the sectors where she sees the most opportunity right now.
Tune in on Spotify, Apple Podcasts, or YouTube.
Rapid-fire
Instacart shares jumped 9% on a report it explored a sale to Uber or DoorDash (Investing.com)
Microsoft stock has swung 7% on average after its last 8 earnings reports (Opening Bell Daily)
President Trump wants a massive AI buildout but his voters are wary (CNBC)
OpenAI says it will no longer train its AI models on the live internet (TechCrunch)
Boeing's 777 freighter line has been idle for nearly two months over a supplier dispute (Yahoo Finance)
Ed Yardeni's new AI bubble meter says the bubble isn't about to burst (Searching for Signals)
This premium sportswear stock could surge 78% as it takes share from much bigger rivals (Best Ideas Club)
On this day
🗓 October 26, 1987: Hong Kong's Hang Seng Index plunged 33% when the exchange reopened after a four-day shutdown, its worst day ever. The Dow fell 8% the same day.
Last thing
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