Market Commentary – A Tale of the Four Horsemen
By: Eric Sterner, CFA, CAIA, FRM, CIPM
Chief Investment Officer, Apollon Wealth Management and Apollon Financial
Over the past few years, I have been asked a few common questions – which companies will come out as the big winners of the AI movement? Or which AI-themed ETF / mutual fund is the best? Well, certainly the Magnificent 7 stocks (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla) have been leading the way the past 3+ years. Hindsight is 20/20. However, which stocks will lead the way from this point forward? There’s certainly not a shortage of Wall Street analysts offering their views, but my response has been this – stay diversified. Then I remind those folks of the Tale of the Four Horsemen.
Dot Com Bubble
I’ve been in the financial services industry for over 30 years, and I still remember the craze of the Dot Com Bubble and eventual burst in the late 1990s and early 2000s. The internet and technology boom of the late 90s was changing consumer preferences, habits, and business models. The market was on fire, setting new highs on a regular basis, and the same question that people are asking today about the AI movement was being asked back then about the new age of the internet – which companies will be the big winners? Enter the “Four Horsemen.”
The Four Horsemen
Many Wall Street analysts and media outlets dubbed Microsoft, Cisco Systems, Intel, and Dell Computer as the Four Horsemen. At that time, these stocks were mega-cap technology stocks recognized for their market dominance and influence of the internet revolution. These four stocks sometimes accounted for 55 – 60% of the NASDAQ’s daily price movements. Many Wall Street analysts quickly predicted these companies would be the big winners of the new age of the internet and proclaimed these stocks as “buy and hold forever.” The approximate market capitalization of these stocks at the peak of the Dot Com Bubble was the following:
Post Dot Com Bubble Burst
As we all know, in the early 2000s the Dot Com Bubble burst as stock valuations were deemed too rich driven by “irrational exuberance” as warned by Fed Chairman Alan Greenspan a few years earlier. The market eventually recovered and as we all know, the internet has certainly changed the world, consumer preferences, and business models, but how accurate were those Wall Street analysts and media outlets who deemed the Four Horsemen as the buy and hold forever stocks? Let’s review.
- Microsoft – If you bought Microsoft stock in the late 1990s and never sold it, you are very, very happy. However, there was some short-term pain for Microsoft shareholders back then as the stock dropped by approximately 66% due to its elevated forward Price-to-Earnings (PE) ratio of nearly 60. It took nearly 14 years for Microsoft to reach a new all-time high. Microsoft is still a dominant mega-cap technology company to this day. Between the years 2000 – 2025, Microsoft has generated annual returns of 15.48%. Not too shabby. The Wall Street analysts got this prediction right, but their good luck ends there.
- Cisco – Cisco’s stock dropped by over 80% during the Dot Com Bubble burst and it took over 25 years for the company to recover and set a new all-time high. While Cisco was able to survive the Dot Com Bubble burst when many other companies did not, the stock crashed due to massive overvaluation. Cisco’s PE ratio peaked at approximately 131. Between the years 2000 – 2025, Cisco’s stock’s annual return was 4.58% while the S&P 500 delivered an annual return of 8.83% during that time.
- Intel – Intel’s stock plummeted by over 50% and its stock has still not fully recovered or set a new all-time high since the Dot Com Bubble burst. Like Cisco, Intel’s stock was overvalued at the time with its PE ratio exceeding 50. Since then, Intel has struggled to regain a market leadership position by failing to adjust for the mass adoption of mobile phones and the AI movement. Between the years 2000 – 2025, Intel’s stock’s annual return was 3.14% while the S&P 500 delivered an annualized return of 8.83% during that time.
- Dell – Dell’s stock declined by approximately 65% during the Dot Com Bubble burst. The euphoria of the Dot Com Bubble drove Dell’s forward PE to over 80. In 2013, Dell went private to escape the intense public market pressure of shrinking profits and to rebuild its business away from the declining PC market. Dell transformed itself into a more diversified technology company and returned to the public markets in 2018. Because Dell has not been a publicly traded company continuously since 2000, we can’t provide its annual returns post Dot Com Bubble burst.
Here’s a quick look at the market capitalizations of these companies today vs their values at the peak of the Dot Com Bubble.
Summary
So, what’s the lesson from the Tale of the Four Horsemen? With any major global transformation such as AI, the market does not do a great job predicting who will be the big winners and the big losers. In the first two months of this year, investors have aggressively sold off stocks in industries such as real estate office space, tax preparation, travel platforms, and software as the market has predicted doomsday for these industries due to the AI movement. Momentum and investor sentiment have temporarily drowned out fundamentals in my opinion. While some software companies may truly face displacement risk from AI, other software providers may be more resilient, and AI may even strengthen their business models.
As far as predicting the big winners, investors would have been better off maintaining broad exposure to the S&P 500 over the past 25 years than placing large allocations to the Four Horsemen. 25 years later only Microsoft’s market capitalization is higher while the other 3 Horsemen’s market caps have remained below their peak.
While there have been on and off talks of an AI bubble and some analysts have tried to draw analogies to the Dot Com Bubble, it’s worth pointing out that the PE ratio of the Top 10 S&P 500 stocks as of 2/26/26 is 25.3, which is nowhere near the extreme PE ratios of the Four Horsemen and other technology stocks in early 2000. AI is transformational affecting almost every industry and will continue to do so in the years ahead. However, I would caution listening to anyone touting which stocks will be the big winners from the AI revolution as technology and the world is changing at such a rapid pace that such predictions will often miss the mark, just as those Wall Street analysts did back in the late 1990s. Stay diversified my friends!
Apollon Wealth Management, LLC and Apollon Financial, LLC (“Apollon”) provide advice and make recommendations based on the specific needs and circumstances of each client. For clients with managed accounts, Apollon has discretionary authority over investment decisions. Investing involves risk and clients should carefully consider their own investment objectives and never rely on any single chart, graph, or marketing price to make decisions. The information contained herein is intended for information purposes only, is not a recommendation to buy or sell any security or strategy and should not be considered investment advice. Market performance information and projections have been provided by third-party sources and, although believed to be reliable, have not been independently verified and its accuracy or completeness cannot be guaranteed. Any opinions, projections, forecasts, and forward-looking statements presented herein are valid as on the date of this document and are subject to change. Index returns are gross of fees; investors cannot invest directly in an index. Past performance is no guarantee of future performance. Please contact your financial advisor with questions about your specific needs and circumstances.
