Sridhar Vembu, the founder of Zoho, has issued a stark warning regarding the current state of artificial intelligence-driven technology valuations, labeling the market as an "insane bubble." Vembu took to X (formerly Twitter) on Saturday, May 30, 2026, to express his concerns, drawing parallels to the dot-com boom of 1999, which he believes is now being surpassed in scale.
High Price-to-Sales Ratios Raise Red Flags
Vembu's alarm stems from the elevated price-to-sales (P/S) ratios exhibited by several major technology companies. He specifically highlighted:
- Nvidia: 20x
- Apple: 10x
- Alphabet (Google): 11x
- Microsoft: 10x
- Meta: 7.5x
- Micron: 19x
Quoting former Sun Microsystems chief Scott McNealy from 2002, Vembu underscored the unsustainability of such valuations: "At 10x revenues, to give you a ten-year payback, I have to pay you 100% of revenues for 10 straight years..." Vembu then added his own assessment, stating, "This is an insane bubble, even bigger than 1999."
Debate Over Profitability vs. Valuation
Vembu's comments sparked a lively debate online, with many users challenging the direct comparison to the dot-com era. A key counter-argument posits that unlike many companies in 1999 that were burning cash with little to no profit, today's tech giants are generating substantial net incomes.
One user noted that P/S ratios might be less relevant for companies like Nvidia, which converts "more than half of their sales into net income." Kislay Parashar of Cosmic Labs echoed this sentiment, emphasizing that "1999 companies were burning cash. These companies are printing cash."
Another commenter, Naren, argued that P/S ratios alone present an incomplete picture, especially without considering profit margins. He pointed out that Nvidia's 20x P/S comes with a 63% net margin and a 32 P/E, which is significantly different from the "high P/S and zero earnings" scenario prevalent in 1999. Naren also questioned the 19x P/S for Micron, suggesting it relies on "stale trailing sales" given the company's recent year-over-year revenue tripling, implying a much lower forward P/S ratio.