Greenspan called it irrational exuberance. The Nasdaq quadrupled anyway

December 5, 1996.

Alan Greenspan was chairman of the Federal Reserve and the Nasdaq was around 1,300.

He warned that stock prices might be getting detached from fundamentals and used the phrase “irrational exuberance.” The Federal Reserve’s own records show the speech was delivered that day at the American Enterprise Institute.

Then the market did something that makes the episode much more interesting than the usual “Greenspan predicted the dot-com crash” story.

It kept going.

The Nasdaq didn’t crash after Greenspan’s warning. It climbed from roughly 1,300 to more than 5,000 by March 2000.

Greenspan later admitted that the market went up for another four years after his warning. In a 2009 Federal Reserve oral history interview, he said the Dow had risen about 80% after his famous remark.

Then the crash came.

The Nasdaq eventually fell to roughly 1,100 in 2002.

So Greenspan was right about the excess and completely wrong about the timing.

That distinction matters because markets can stay irrational much longer than a trader can stay positioned for the correction.

And there is a reason this old episode keeps coming back.

The Nasdaq just hit another record high this week, reaching 27,599.79 on October 6, 2026. It is up 18.7% this year.

The rally is being driven heavily by AI.

The Federal Reserve is now openly discussing the scale of the AI buildout. Governor Lisa Cook said in September that a large portion of the rise in equity prices in recent years can be attributed to enthusiasm about AI, while noting that companies have only spent a small fraction of roughly $2 trillion in announced AI investment plans.

Vice Chair Philip Jefferson also said this month that the economy is being shaped by rapid AI adoption and a “massive AI infrastructure buildout,” alongside an energy shock and changes in trade policy.

That does not prove today’s market is another 1999.

It does show why the Greenspan episode is worth remembering.

In 1996, calling the market exuberant did not stop the bubble.

The warning was early.

The market still had years of gains left.

And when the crash finally arrived, the fact that someone had identified the excess four years earlier didn’t make the timing any less painful.

The Nasdaq can keep going.

That is exactly what happened last time.