Analysis of Shiller CAPE vs. Current Earnings Valuations: Dot-Com Bubble Proximity Concerns

This analysis addresses the Reddit post [1] questioning why the Shiller Cyclically Adjusted Price-to-Earnings (CAPE) ratio is near dot-com bubble levels (~39-40 [2][3]) even as current earnings support valuations (trailing twelve-month PE ~30 [3]). Short-term earnings are boosted by AI-driven growth: IQSTEL’s AI services grew >50% YoY for three consecutive quarters [5], and S&P500 Q3 2025 blended earnings rose by13.1% YoY [6]. However, CAPE’s 10-year earnings smoothing captures long-term mean reversion risks, as seen in the 49% S&P500 drop post-2000 dot-com peak (CAPE 44 [4]).

1. Short-Term vs Long-Term Discrepancy
   : AI growth sustains short-term valuations, but CAPE signals long-term correction risks due to historical precedent.
2. Earnings Composition
   : The shift toward AI earnings (GenAI CAGR 42% to 2032 [7]) may alter traditional valuation norms, but CAPE’s 10-year lens questions sustainability.
3. Sector Impact
   : Tech and communication services sectors benefit most from AI growth, but are also most exposed to valuation corrections if growth slows.

• Valuation Correction
  : CAPE proximity to dot-com levels increases long-term correction risk [4].
• Growth Slowdown
  : If AI earnings fail to meet 10-year expectations (agentic AI projected CAGR ~150% [7]), high-valuation stocks may decline.

• Short-term gains in AI-exposed sectors (IT, communication services) amid robust quarterly earnings [5][6].
• Strategic monitoring of AI earnings trajectory to identify sustainable growth opportunities.

• Metrics
  : Shiller CAPE (~39-40), TTM PE (~30), AI earnings growth (>50% YoY for IQSTEL [5]).
• Affected Instruments
  : S&P500 index, AI stocks (IQST, CRWV, RDCM, TASK).
• Monitor
  : AI earnings growth trajectory, interest rate changes, regulatory developments for AI, and S&P500 earnings composition shifts.