--- title: "Setting aside the US-Iran situation and high oil prices, which industries can maintain independent high prosperity in the future?" type: "News" locale: "en" url: "https://longbridge.com/en/news/280045621.md" description: "The report analyzes the impact of the Kosovo War on the U.S. stock market and technology sector from 1999 to 2000, pointing out that high oil prices and interest rate hikes did not prevent certain industries from experiencing high prosperity. Despite liquidity tightening, the technology sector showed strong growth driven by the millennium bug replacement wave, with the NASDAQ-100 index reaching a new high in 1999. The report emphasizes that independent industries can withstand external economic pressures at specific stages" datetime: "2026-03-22T08:05:45.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/280045621.md) - [en](https://longbridge.com/en/news/280045621.md) - [zh-HK](https://longbridge.com/zh-HK/news/280045621.md) --- # Setting aside the US-Iran situation and high oil prices, which industries can maintain independent high prosperity in the future? **Report Summary** I. 1999-2000: The Impact of the Kosovo War on the Tech Sector In last week's report, we focused on: the 1999 Kosovo War - rising oil prices - U.S. inflation - Federal Reserve interest rate hikes, and how this process affected the U.S. stock market and the tech sector. The core conclusion is: The rise in oil prices due to the war pushed up inflation, the Dow Jones Industrial Average was suppressed in Q3 1999, peaking and then declining in January 2000; while the Nasdaq tech sector performed stronger, unaffected by the tightening, with the bubble peak lagging the Federal Reserve's first rate hike by 9 months. II. 1999-2000: History Proves That Independent Industries with High Prosperity Can Temporarily Overcome High Oil Prices and Interest Rate Hikes **(1) Denominator: The Kosovo War Triggered Liquidity Tightening** In early 1999, OPEC cut production + the Kosovo War (March 1999 - June 1999) caused oil prices to rise from $10 per barrel to over $30; the Federal Reserve restarted the interest rate hike cycle in June 1999, with a total of 6 rate hikes by May 2000, leading to a tightening of liquidity in the U.S. stock market. **(2) Numerator: High Prosperity Expectations Supported by the Y2K Upgrade Wave** The Y2K narrative fermented from 1996 to 1998, with mainstream media promotion, U.S. Congressional records, and presidential speeches prioritizing the repair of hardware and system bugs in finance, healthcare, military, and government systems, leading to a boom in orders in the tech sector from 1998 to 1999. Correspondingly, the performance of leading tech companies in 1999 was as follows: Dell's net profit growth was 55%, Microsoft's 73%, IBM's 22%, and Intel's 21%, all maintaining high growth or significantly accelerating compared to 1998. Moreover, the market expected that with the arrival of 2000, the upgrade wave caused by system failures would continue. **(3) Market Performance in 1999: Strong Fundamentals Overcame Liquidity Tightening and Tech Sector Valuation Bubble** The EPS growth rate of the Nasdaq 100 Index (leaders) in 1999 was 60%, corresponding to a PE (TTM) of 95x, and a dynamic PE of 65x. 1999 was a year of intensified tech sector bubbling, as expectations of the new millennium further drove the upgrade cycle for small businesses/individuals, with the prosperity of the tech sector overcoming the impact of rising interest rates, leading to new highs in the Nasdaq **(4) Market Performance in 2000: When Fundamentals Deteriorate, the Last Straw Can Break the Camel's Back** The "Y2K bug" did not erupt, and the media accused it of being a "century scam" fabricated by tech companies. The peak of the tech bubble in March 2000 seemed to be punctured by "Microsoft's antitrust," but in reality, it was a negative spiral of fundamentals. The advance investments by companies in hardware/system upgrades had overdrawn industry demand for the next 2-3 years, and the financial reports disclosed by leading tech companies in March-April 2000 largely missed expectations, leading some .com companies to begin going bankrupt. By the end of 2000, the inventory of computer electronic products in the United States reached a historic high, and the backlog of inventory further suppressed future performance. By 2001, the profit growth rate of the Nasdaq 100 index fell from 60% in 1999 to -50%, marking the end of the tech myth. **III. Back to the Present: Excluding Geopolitics and High Oil Prices, Which Industries May Maintain Independent High Prosperity in the Future?** Currently, the visibility of overseas AI chains such as optical communication deepens in 2027, remaining a certain prosperous direction and the main position of current institutions. However, it is relatively linked to the changes in the current Middle East war (oil prices → U.S. interest rate environment → U.S. AI → domestic supply chain), making short-term volatility difficult to control. Referring to the experience of the tech industry back then, we are currently looking for some industries that can maintain independent high prosperity in the future. If the prosperity trend is relatively desensitized from geopolitics and high oil prices, then regardless of how the U.S.-Iran situation unfolds in the next phase, it should have an advantage in allocation. Therefore, from the perspective of controlling portfolio volatility and hedging, we recommend continuing to allocate two β directions that are already in an upward trend and less affected by oil prices, in addition to overseas computing power: the energy storage chain (inverters/lithium battery chain) and the domestic AIDC chain (especially the Byte chain). **Risk Warning:** Geopolitical risks, overseas inflation risks, low expectations for domestic growth stabilization policies, etc. **Report Body** **I. This Week's Viewpoint** In last week's report, we focused on the transmission of the 1999 Kosovo War on subsequent U.S. asset prices: What impact did the 1999 Kosovo War - rising oil prices - and the Federal Reserve's interest rate hikes have on the U.S. market and tech stocks? **The core conclusion is:** In the first half of 1999, as the Kosovo War escalated, Brent crude oil rose from $10/barrel to over $30/barrel, triggering the Federal Reserve to start a new round of interest rate hikes in June 1999, with six consecutive rate increases During this process, the Dow Jones Index, which is more related to industrial costs, fluctuated and retraced in Q3 1999, temporarily suppressed by oil prices and interest rate hikes. In Q4, after peaking with the tech bubble, it reached its high in January 2000. In contrast, the tech-heavy Nasdaq Index was not affected by the tightening of liquidity. From the first interest rate hike by the Federal Reserve until the Nasdaq peaked in March 2000, the index rose by 91%, entering a final frenzy, with the peak lagging behind the Fed's rate hike by 9 months. **This leads to a current topic worth discussing: When liquidity (negative) and the industrial cycle (positive) diverge, which does the market prioritize?** **Referring to the tech bubble of 2000, what current sectors can achieve independent high growth despite high oil prices and inflation?** **** **(1)** **1998-2000: Independent industrial prosperity can overcome high oil prices and interest rate hikes** **1.** **Denominator: The Kosovo War and rising oil prices triggered liquidity tightening** In 1999, geopolitical wars and oil prices impacted the narrative of the "golden-haired girl." After the Asian financial crisis ended, the global deflationary cycle reversed, and commodity prices began to warm up. Additionally, in early 1999, OPEC and non-OPEC countries jointly cut production, coupled with the outbreak of the Kosovo War (March-June 1999), causing oil prices to rise from $10 per barrel to over $30 per barrel. At this time, the CPI inflation in the U.S. also rose rapidly, leading the Federal Reserve to re-enter the interest rate hike cycle in June 1999, increasing the federal funds rate from 4.75% to 6.5% by May 2000. **2.** **Numerator: The "Y2K bug" replacement wave supported high prosperity expectations, desensitizing to oil prices and interest rate hikes** However, the stock market performance, especially in tech, was not affected by the tightening expectations. The sequence of the Kosovo War (March 1999 - June 1999) -\> rising oil prices -\> Fed interest rate hikes (June 1999 - May 2000) -\> economic suppression -\> tech bubble burst (March 2000) was not a sudden occurrence. The core reason for the strong stock market in 1999 was the replacement wave triggered by the "Y2K bug," which provided strong support for the fundamentals of the U.S. tech industry chain. From the perspective of the demand cycle for computer hardware, the period from 1990 to 1995 was a high penetration phase with continuously rising global PC shipments, but growth began to slow down and demand weakened in 1996-1997. However, the emergence of the "Y2K bug" narrative led to a wave of upgrades in the tech industry chain (servers, mainframes, PCs, software) in 1998-1999, quickly reversing the expectations of high future demand growth among global investors The table below shows that the Y2K narrative fermented from 1996 to 1998, with mainstream media promotion, presidential speeches, and attention from U.S. government agencies. The financial, medical, military, and government systems prioritized fixing hardware and system bugs, leading to a boom in orders for the tech industry from 1998 to 1999. The performance of listed companies also confirms the impact of Y2K. In 1997-1998, the fundamentals of tech giants had already declined; however, the expectation of an explosion in orders due to Y2K created a "brief prosperity" for leading tech companies from 1998 to 1999, and this prosperity was desensitized to oil prices and interest rate hikes. In terms of ROE: from 1990 to 1996, leading tech companies generally achieved ROE levels above 40%; in 1997-1998, as the growth rate of internet users and PC shipments slowed, the ROE of tech leaders began to decline; in 1999, due to the capital expenditure boom triggered by Y2K, the ROE of tech companies briefly stabilized and rebounded, but after 2000, it experienced a more significant decline. From the perspective of EPS growth rate: in 1999, Dell's net profit growth was 55%, Microsoft's 73%, IBM's 22%, and Intel's 21%, all maintaining high growth or significantly accelerating compared to 1998. **3.** **From the performance of the tech industry in 1999-2000: independent fundamental high growth overcame high oil prices and interest rate hikes, leading to valuation bubbles.** **Market performance in 1999: The high growth of the tech industry overshadowed the impacts of oil prices and interest rate hikes, leading to valuation bubbles.** The NASDAQ 100 index (leaders) had an EPS growth rate of 60% in 1999, corresponding to a PE (TTM) of 95x and a dynamic PE of 65x. 1999 was a year of intensified tech bubble, as the expectation that the arrival of the millennium would further drive the replacement cycle for small businesses/personal computers led to the prosperity of tech performance overcoming the impact of rising interest rates, with the NASDAQ reaching new highs. **By 2000: when the high growth of fundamentals became unsustainable, even the last straw could break the camel's back.** The "Y2K bug" did not explode, and the media accused it of being a "century scam" fabricated by tech companies. The tech peak in March 2000 seemed to be punctured by "Microsoft antitrust," but in reality, it was a negative spiral of fundamentals. The advance investment in replacement/system upgrades by companies had overdrawn industry demand for the next 2-3 years, and the financial reports disclosed by leading tech companies in March-April 2000 largely missed expectations, with some .com companies beginning to go bankrupt At the end of 2000, the inventory of computer electronic products in the United States reached a historic peak, and the inventory backlog further suppressed future performance. By 2001, the profit growth rate of the NASDAQ-100 index fell from 60% in 1999 to -50%, marking the end of the internet myth. **(2)** **Back to the present: Setting aside conflicts and high oil prices, which industries may maintain independent high prosperity in the future?** Currently, the visibility of overseas AI chains such as optical communication is deepening for 27 years, remaining a certain prosperous direction and the main position of current institutions. However, it is relatively linked to the current changes in the Middle East war (oil prices → U.S. interest rate environment → U.S. AI → domestic supply chain), making short-term volatility difficult to control. Referring to the experience of the internet industry back then, we seek some industries that can maintain independent high prosperity in the future, relatively desensitized to geopolitics and high oil prices. Regardless of how the U.S.-Iran situation unfolds in the next phase, they possess advantages in allocation. **From the perspective of controlling portfolio volatility and hedging, we recommend continuing to allocate two β directions that are already in an upward trend and less affected by oil prices, in addition to overseas computing power: the energy storage chain (inverters/lithium battery chain) and domestic AIDC chain (especially Byte chain).** 1. Energy Storage Chain: Looking overseas, the recovery of household storage in Europe and Australia; domestically, the recovery of the lithium battery chain. In terms of overseas household storage, as of the Q3 2025 report, energy storage inverter companies are in a state of profit pressure + capacity inventory destocking. By 2026, many countries in Europe and Australia are expected to launch household storage stimulus policies, which may drive a reversal of the difficulties faced by Chinese export supporting companies in 2026. From high-frequency export data, China's inverter exports saw significant growth in January-February. Therefore, setting aside oil price factors, energy storage inverters are already in a reversal channel. The energy concerns in Europe caused by oil prices have only accelerated the unfolding of the related logic. In terms of domestic large storage, 2026 is expected to see significant installation growth, driving a reversal of difficulties in lithium batteries and upstream material equipment. By the Q3 2025 report and annual report forecasts, companies in various segments of the industry chain have gradually shown reversal trends, indicating a turning point in profit growth. Looking ahead, price increases and orders in the lithium battery chain may continue to be reflected in the high growth of the Q1 report 1. Domestic AIDC Chain: Under the explosive demand for inference, the construction of AIDC is expected to accelerate, driving high growth in the upstream and downstream of the industry chain. Due to the limitations of computing power cards, the development of AI in China is relatively 1-2 years behind that of overseas. On the demand side, an explosion of Tokens (represented by Doubao) has already been observed in 2025. Entering 2026, with the gradual easing of supply-side bottlenecks in chips and the further acceleration of inference demand, the construction of domestic AIDC is also expected to accelerate, creating a pull effect on the upstream and downstream of the industry chain, potentially replicating the narrative of North American AI in 2025. **Among them, we particularly recommend the Byte industry chain.** Risk Warning and Disclaimer The market has risks, and investment requires caution. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. 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