Lessons from the ’90s: How AI Is Powering a New Investment Cycle
Technology spending is accelerating at the fastest pace in decades. Figure 1 shows investment in information processing equipment and software grew +14% year-over-year (YoY) in Q1 2025, the fastest pace since the late 1990s.
For your convenience, we’ve also provided a PDF copy of the Chart of the Month | Lessons from the ’90s: How AI Is Powering a New Investment Cycle
During the dot-com era, investment in computers and software grew over +15% YoY before collapsing in the early 2000s as the tech bubble burst. Tech investment rebounded in the mid-2000s but turned negative again in 2008 as economic growth slowed. Spending growth averaged a more modest +5.5% YoY in the 2010s, but it remained well below the highs of the late 90s. The COVID pandemic initially caused tech spending to stall, but it reaccelerated in recent years and is now growing at 1990s levels.
Figure 2 graphs annual capital expenditures by telecom and artificial intelligence (AI) companies, adjusted for inflation. The data reveals two distinct eras of rapid technology investment. At the turn of the century the world was transitioning to a more digital society. In the late 1990s, telecom companies invested heavily to lay fiber, construct cell towers, and build the internet’s physical backbone. Telecom investment slowed in the early 2000s before stabilizing over the past two decades.
Today, a new wave of tech investment is underway, driven by advancements in AI. Leading tech companies are investing billions in computer chips to train AI models, data centers to run the models, and new energy infrastructure to support it all. The chart shows AI capex could soon surpass the telecom peak from the late 1990s.
The latest tech spending boom has significantly impacted the stock market. Over the past two years, the S&P 500 technology sector gained +66%, outpacing the S&P 500’s +42% return. The “Magnificent 7,” a group of mega-cap AI leaders that includes Nvidia, Microsoft, Amazon, and Meta, returned +89% over the same period, more than double the S&P 500’s price return. The group’s large index weight and its ability to convert the AI industry’s momentum into earnings growth have driven the stock market to a series of record highs.
This period is a historical moment, marked by billions being spent to develop a transformative technology. Two takeaways come to mind when reviewing the figures below. First, as the late 1990s telecom boom showed, today’s rapid growth will eventually return to a more normal level. The current growth rate is unlikely to continue indefinitely, and Figure 1 shows tech investment has historically been tied to overall economic growth. Second, today’s spending levels are a reminder that the U.S. economy has a strong track record of innovation and economic resilience. Investing in the stock market offers a way to participate in and benefit from those advancements.
Disclosure
The information and opinions provided herein are provided as general market commentary only – not financial advice – and are subject to change at any time without notice. This commentary may contain forward-looking statements that are subject to various risks and uncertainties. None of the events or outcomes mentioned here may come to pass, and actual results may differ materially from those expressed or implied in these statements. No mention of a particular security, index, or other instrument in this report constitutes a recommendation to buy, sell, or hold that or any other security, nor does it constitute an opinion on the suitability of any security or index. The report is strictly an informational publication and has been prepared without regard to the particular investments and circumstances of the recipient.
Past performance does not guarantee or indicate future results. Any index performance mentioned is for illustrative purposes only and does not reflect any management fees, transaction costs, or expenses. Indexes are unmanaged, and one cannot invest directly in an index. Index performance does not represent the actual performance that would be achieved by investing in a fund.
See Full Disclosures Page
Concerns or questions about how your investment portfolio will hold up in the current market environment? Contact Financial Synergies today.
We are a boutique, financial advisory and total wealth management firm with over 35 years helping clients navigate turbulent markets. To learn more about our approach to investment management please reach out to us. One of our seasoned advisors would be happy to help you build a custom financial plan to help ensure you accomplish your financial goals and objectives. Schedule a conversation with us today.
More relevant articles by Financial Synergies:
Blog Disclosures
This content, which may contain security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own financial advisors as to legal, business, tax, and other related matters concerning any investment.
The commentary in this “post” (including any related blogs, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Financial Synergies Wealth Advisors, Inc. employees providing such comments, and should not be regarded as the views of Financial Synergies Wealth Advisors, Inc. or its respective affiliates or as a description of advisory services provided by Financial Synergies Wealth Advisors, Inc. or performance returns of any Financial Synergies Wealth Advisors, Inc. client.
Any opinions expressed herein do not constitute or imply endorsement, sponsorship, or recommendation by Financial Synergies Wealth Advisors, Inc. or its employees. The views reflected in the commentary are subject to change at any time without notice.
Nothing on this website or Blog constitutes investment or financial planning advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. It also should not be construed as an offer soliciting the purchase or sale of any security mentioned. Nor should it be construed as an offer to provide investment advisory services by Financial Synergies Wealth Advisors, Inc.
Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Financial Synergies Wealth Advisors, Inc. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
Any charts provided here or on any related Financial Synergies Wealth Advisors, Inc. personnel content outlets are for informational purposes only, and should also not be relied upon when making any investment decision. Any indices referenced for comparison are unmanaged and cannot be invested into directly. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional. Any projections, estimates, forecasts, targets, prospects and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Information in charts have been obtained from third-party sources and data, and may include those from portfolio securities of funds managed by Financial Synergies Wealth Advisors, Inc. While taken from sources believed to be reliable, Financial Synergies Wealth Advisors, Inc. has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. All content speaks only as of the date indicated.
Financial Synergies Wealth Advisors, Inc. is a registered investment adviser. Advisory services are only offered to clients or prospective clients where Financial Synergies Wealth Advisors, Inc. and its representatives are properly licensed or exempt from licensure. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
See Full Disclosures Page Here
Chart of the Month | Lessons from the ’90s: How AI Is Powering a New Investment Cycle
Lessons from the ’90s: How AI Is Powering a New Investment Cycle
Technology spending is accelerating at the fastest pace in decades. Figure 1 shows investment in information processing equipment and software grew +14% year-over-year (YoY) in Q1 2025, the fastest pace since the late 1990s.
For your convenience, we’ve also provided a PDF copy of the Chart of the Month | Lessons from the ’90s: How AI Is Powering a New Investment Cycle
During the dot-com era, investment in computers and software grew over +15% YoY before collapsing in the early 2000s as the tech bubble burst. Tech investment rebounded in the mid-2000s but turned negative again in 2008 as economic growth slowed. Spending growth averaged a more modest +5.5% YoY in the 2010s, but it remained well below the highs of the late 90s. The COVID pandemic initially caused tech spending to stall, but it reaccelerated in recent years and is now growing at 1990s levels.
Figure 2 graphs annual capital expenditures by telecom and artificial intelligence (AI) companies, adjusted for inflation. The data reveals two distinct eras of rapid technology investment. At the turn of the century the world was transitioning to a more digital society. In the late 1990s, telecom companies invested heavily to lay fiber, construct cell towers, and build the internet’s physical backbone. Telecom investment slowed in the early 2000s before stabilizing over the past two decades.
Today, a new wave of tech investment is underway, driven by advancements in AI. Leading tech companies are investing billions in computer chips to train AI models, data centers to run the models, and new energy infrastructure to support it all. The chart shows AI capex could soon surpass the telecom peak from the late 1990s.
The latest tech spending boom has significantly impacted the stock market. Over the past two years, the S&P 500 technology sector gained +66%, outpacing the S&P 500’s +42% return. The “Magnificent 7,” a group of mega-cap AI leaders that includes Nvidia, Microsoft, Amazon, and Meta, returned +89% over the same period, more than double the S&P 500’s price return. The group’s large index weight and its ability to convert the AI industry’s momentum into earnings growth have driven the stock market to a series of record highs.
This period is a historical moment, marked by billions being spent to develop a transformative technology. Two takeaways come to mind when reviewing the figures below. First, as the late 1990s telecom boom showed, today’s rapid growth will eventually return to a more normal level. The current growth rate is unlikely to continue indefinitely, and Figure 1 shows tech investment has historically been tied to overall economic growth. Second, today’s spending levels are a reminder that the U.S. economy has a strong track record of innovation and economic resilience. Investing in the stock market offers a way to participate in and benefit from those advancements.
Disclosure
The information and opinions provided herein are provided as general market commentary only – not financial advice – and are subject to change at any time without notice. This commentary may contain forward-looking statements that are subject to various risks and uncertainties. None of the events or outcomes mentioned here may come to pass, and actual results may differ materially from those expressed or implied in these statements. No mention of a particular security, index, or other instrument in this report constitutes a recommendation to buy, sell, or hold that or any other security, nor does it constitute an opinion on the suitability of any security or index. The report is strictly an informational publication and has been prepared without regard to the particular investments and circumstances of the recipient.
Past performance does not guarantee or indicate future results. Any index performance mentioned is for illustrative purposes only and does not reflect any management fees, transaction costs, or expenses. Indexes are unmanaged, and one cannot invest directly in an index. Index performance does not represent the actual performance that would be achieved by investing in a fund.
See Full Disclosures Page
Concerns or questions about how your investment portfolio will hold up in the current market environment? Contact Financial Synergies today.
We are a boutique, financial advisory and total wealth management firm with over 35 years helping clients navigate turbulent markets. To learn more about our approach to investment management please reach out to us. One of our seasoned advisors would be happy to help you build a custom financial plan to help ensure you accomplish your financial goals and objectives. Schedule a conversation with us today.
More relevant articles by Financial Synergies:
Blog Disclosures
This content, which may contain security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own financial advisors as to legal, business, tax, and other related matters concerning any investment.
The commentary in this “post” (including any related blogs, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Financial Synergies Wealth Advisors, Inc. employees providing such comments, and should not be regarded as the views of Financial Synergies Wealth Advisors, Inc. or its respective affiliates or as a description of advisory services provided by Financial Synergies Wealth Advisors, Inc. or performance returns of any Financial Synergies Wealth Advisors, Inc. client.
Any opinions expressed herein do not constitute or imply endorsement, sponsorship, or recommendation by Financial Synergies Wealth Advisors, Inc. or its employees. The views reflected in the commentary are subject to change at any time without notice.
Nothing on this website or Blog constitutes investment or financial planning advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. It also should not be construed as an offer soliciting the purchase or sale of any security mentioned. Nor should it be construed as an offer to provide investment advisory services by Financial Synergies Wealth Advisors, Inc.
Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Financial Synergies Wealth Advisors, Inc. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
Any charts provided here or on any related Financial Synergies Wealth Advisors, Inc. personnel content outlets are for informational purposes only, and should also not be relied upon when making any investment decision. Any indices referenced for comparison are unmanaged and cannot be invested into directly. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional. Any projections, estimates, forecasts, targets, prospects and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Information in charts have been obtained from third-party sources and data, and may include those from portfolio securities of funds managed by Financial Synergies Wealth Advisors, Inc. While taken from sources believed to be reliable, Financial Synergies Wealth Advisors, Inc. has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. All content speaks only as of the date indicated.
Financial Synergies Wealth Advisors, Inc. is a registered investment adviser. Advisory services are only offered to clients or prospective clients where Financial Synergies Wealth Advisors, Inc. and its representatives are properly licensed or exempt from licensure. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
See Full Disclosures Page Here
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