The S&P 500 Is Flashing a Warning Sign Not Seen Since the Dot-Com Bubble. Here's What History Says Investors Should Do.

The S&P 500's Shiller CAPE ratio hit 42, matching levels last seen during the dot-com bubble, which peaked at 44. The valuation metric signals potential overheating in equities as the index hovers near record territory.

The warning comes as 43% of fund managers now believe artificial intelligence stocks have entered bubble territory, according to The Motley Fool. Tech stocks have shown recent weakness amid the stretched valuations, raising concerns about a sector-wide correction similar to the 2000 crash.

The Shiller CAPE—cyclically adjusted price-to-earnings ratio—compares current prices to 10-year average inflation-adjusted earnings. Only the dot-com peak exceeded today's reading. That bubble burst in March 2000, erasing trillions in market value over the subsequent two years.

The current setup mirrors 2000 in key ways: euphoria around a transformational technology, extreme valuations concentrated in a narrow set of stocks, and growing skepticism among professional investors. The difference is breadth—AI hype has lifted a wider swath of companies than the dot-com era's internet pure-plays.