We Asked T. Rowe's $8 Billion Tech Manager Why We Are in 1998 — And Why Software Is in Trouble

**SPEAKER_1** (0:00)
This episode is brought to you by Welch's Fruit Snacks. Back to school season can be tough on parents, but choosing a snack you and your kids can both get behind doesn't have to be. Stock up on Welch's Fruit Snacks, made with whole fruit and now made with no artificial dyes.
It's a snack kids already love and one you can feel good about giving them. Go back to school with Welch's Fruit Snacks, now made with no artificial dyes.

**SPEAKER_2** (0:31)
Faster Quotes start at the Lowe's Pro Desk. Got a material list handwritten on a sticky note or saved as a photo? Perfect. Bring it to us and get a quote in minutes. If you don't see what you need on the shelf, we'll help you get it. You can access thousands of products beyond what's available in store or on lowes.com right from the Lowe's Pro Desk. Build quotes faster and source the materials you need to keep your jobs moving. Just like that at Lowe's.

**Jack Forehand** (1:01)
Welcome to Excess Returns. I'm Jack Forehand, joined by the better half of our hosting team today, Kai Wu of Sparkline Capital.
And today we're really lucky to have Dom Rizzo on. Dom's the portfolio manager of T. Rowe Price's global technology equity strategy and the firm's technology ETF. And we are going to talk about the thing everybody's talking about these days, which is AI and everything that's going on there. And we're going to get deep into the technology and what it might mean for the economy and a lot of different things. But we're going to start at a high level because we have had, it's funny, when I put these questions together, it was like three days ago and I was going to talk about the big correction. We're having these types of stocks and then two days later, we're back to a rally. But I did want to ask you about that because one of the things I read in our prep for this is you had a quote that said, this feels a lot like the 1998 sell-off to me, which proved to be an incredible buying opportunity. So I'm wondering if maybe you could talk about what we've seen recently in that quote.

**Dom Rizzo** (1:47)
Yeah, well, first off, thanks for having me, guys. It's great to be here. For the listeners, I think it's really important you know that I love the question lists that you guys sent over. So I'm really excited for this pod.
Look, well, first off, let's take this with a grain of salt. I was five years old in 1998 So this is not personal stock picking experience, but from someone who loves markets and cycles, and studying bubbles and reflexivity.
Look, if you did rewind to 1997-98, I think there's a couple of similarities. So one is really high momentum factor in terms of day-to-day trading volatility and month-to-month trading volatility. And if you just look at the statistics from June and July, June was literally in the top 4% for momentum factor for monthly returns. And then July was in the bottom 1%. So we're in a high vol, high momentum driven market either on the way up or on the way down. And that has some similarities. You have some geopolitical shocks. So Asia financial crisis was more 97 heading into 98 But Iran war and questions around oil pricing and where that's going to end now. So I think that there's some similarities there. I think there's some similarities in the technical trading around, large hedge funds having some issues as well. Long-term capital management was many, many multiples time bigger from a systemic risk perspective to situational awareness.
But I've seen estimates of situational awarenesses, public gross exposure being north of $100 billion. That was obviously unwinding through much of July now in hindsight. So I think there's some similarities there. There is a fairly big fundamental difference with 98
That is actually in the fundamentals themselves. So if you go back and look at the semiconductor industry in 1998, you saw an 8% revenue decline. That was mostly driven by the decline in memory pricing.
But then if you look in 2026, industry sources have something like a 64% revenue increase. So, you know, there's similarities, like all great things in history, it rhymes, it doesn't repeat. But we are clearly not seeing that decline that we saw in 1998 from an overall revenue perspective. Yet we're seeing almost similar price action, right? You know, the stocks went down 40% in 1998, and we saw a 30% drawdown recently in the stocks. So some similarities, not perfect. But I think overall, thinking about this as a 1998 style correction that results in an even stronger follow on is kind of a good mental framing.