Sridhar Vembu, founder and chief scientist of Zoho Corporation, has warned that the sharp rise in valuations of some of the world's biggest technology companies, driven by enthusiasm around artificial intelligence (AI), shows signs of a market bubble that could surpass the dot-com era.
In a post on social media platform X, Vembu pointed to the price-to-sales ratios of leading technology firms, arguing that their market valuations are becoming increasingly disconnected from underlying business fundamentals.
He highlighted companies including Nvidia, Apple, Alphabet, Microsoft, Meta Platforms and Micron Technology, noting that several are trading at unusually high multiples of their annual revenues.
According to Vembu, Nvidia is currently valued at around 20 times sales, while Apple, Alphabet and Microsoft trade at roughly 10 to 11 times sales. Meta stands at about 7.5 times sales, while Micron is valued at nearly 19 times sales.
To support his argument, Vembu cited comments made by Scott McNealy after the dot-com crash in the early 2000s. McNealy had argued that investors paying ten times a company's annual revenue would require exceptional growth and profitability over an extended period to justify such valuations.
Drawing comparisons with the technology boom of the late 1990s, Vembu said the current market environment resembles "an insane bubble" and could be even larger than the one seen in 1999.
"Price to sales ratio for big tech (not price to earnings): Nvidia: 20x, Apple: 10x, Alphabet (Google): 11x, Microsoft: 10x, Meta: 7.5x, Micron: 19x," he said.
"As Scott McNealy of Sun Micro said back on 2002: 'At 10x revenues, to give you a ten-year payback, I have to pay you 100% of revenues for 10 straight years," Vembu added.
"This is an insane bubble, even bigger than 1999," he mentioned.
His remarks come as AI-linked stocks, particularly semiconductor makers and software companies, continue to rally on expectations that artificial intelligence will deliver substantial growth and productivity gains across industries. The AI boom has pushed several technology giants to record market capitalisations and helped drive major stock indices to fresh highs.
