Everyone is discussing "the reappearance of 1999," but overlooking the "inflation signals" emitted by the market

The current market enthusiasm for artificial intelligence (AI) is being compared to the internet bubble of 1999, but a key difference is being overlooked: unlike the soaring tech stocks and falling gold prices of that time, today tech stocks and gold are both hitting new highs simultaneously. This unusual phenomenon suggests that the market may be pricing in a radically different future—an era where global massive debt is resolved through inflation.

With tech giants like Nvidia leading the market, many investors and traders, including Jeff Bezos, are looking back to the historical scenario of 1999 in search of similarities. However, Eric Peters, Chief Investment Officer of One River Asset Management, points out an "inconvenient truth": during the internet boom from 1995 to 2000, the S&P 500 index nearly doubled, while gold prices fell by 25%.

In contrast, since OpenAI launched ChatGPT in November 2022, igniting this round of AI enthusiasm, the S&P 500 index has risen by 70%, while gold prices have surged by as much as 120%. This simultaneous strength in gold and tech stocks is in stark contrast to the capital flow patterns of the late 1990s, when funds flowed out of safe-haven assets like gold and into tech stocks.

This core difference may signal an important shift. Eric Peters believes the market may be sending a signal: we could be entering a period of inflationary prosperity, or, in the next economic downturn, the enormous debt pressure will force policymakers to adopt aggressive inflationary measures in response. In either case, the core points to an "inflationary" solution to alleviate the global debt backlog of up to $340 trillion.

Replaying 1999? Divergence of Gold and Tech Stocks

Comparing the current AI-driven bull market to the internet bubble of the late 1990s has become one of the mainstream narratives in the market. However, data shows that there are fundamental differences in the performance of core assets between the two. During the internet boom from August 1995 to the summer of 2000, the market exhibited a typical "risk appetite" pattern, with funds chasing high-growth tech stocks while traditional safe-haven assets like gold were sold off.

However, the current AI-driven market is entirely different. Since November 2022, trillions of dollars have flowed into areas like Nvidia chips and data centers, with a fervor comparable to the ".com" companies of that time. At the same time, gold has also attracted record inflows. This rare situation of "risk assets" and "safe-haven assets" rising together breaks historical norms and compels investors to reassess the deeper messages conveyed by the market.

The Nature of the AI Boom: From Intangible Software to Tangible Infrastructure

Another key difference between the current AI boom and the internet bubble is its investment nature. The frenzy of the late 1990s primarily revolved around intangible software and unproven business models, such as the ultimately failed Pets.com. Speculation was the main driver of capital expenditure at that time In contrast, the current AI cycle places greater emphasis on tangible infrastructure construction. At its core are hardware (chips), networks, and energy systems, which can create durable assets with measurable productivity gains. Capital expenditure is no longer merely short-term speculation but a foundational force for building the future economy. This reliance on physical infrastructure makes this technology cycle markedly different from any previous ones.

Real-World Bottlenecks: AI's Resource Demands Raise Inflation Expectations

The demand for AI infrastructure is directly translating into a massive consumption of real-world resources, further explaining why the market has begun to factor in inflation expectations. The power consumption of large language models (LLMs) is comparable to that of a small country, and their data center cooling systems require significant water resources, placing immense pressure on energy and water supplies in various countries.

Unlike building a website, the development of AI requires decades of large-scale investment in the power grid, solar energy, wind energy, and even nuclear energy. These massive project investments reveal real-world supply bottlenecks, the effects of which are already evident in commodity markets— for example, the price of copper, a key industrial raw material, has surged. When vast capital chases limited physical resources, inflationary pressures follow.

$340 Trillion Debt Overhang, Market Bets on "Inflationary" Solutions

The simultaneous occurrence of "more buyers than sellers" in the AI theme and gold market seems to suggest that the market is calibrating towards an "inflationary innovation paradigm." Eric Peters points out that this shift coincides with a rather subtle stance from the Federal Reserve—its inclination to cut rates bears similarities to the 1990s, but in the current environment, perhaps it should raise rates.

Market participants have witnessed that in every past economic cycle, policymakers' stimulus responses have become increasingly aggressive. Eric Peters' analysis indicates that the purchasing power of the dollar has shrunk by 90% over his lifetime and by 61% during his career. Faced with a global debt overhang of up to $340 trillion, the market may be betting that decision-makers will ultimately choose to dilute the debt burden through inflation. In this context, investors who cling to traditional value investing may find themselves "buried" in a world where future value is defined by innovation and inflation protection