AI Mania and the Dot-Com Bubble

[TommyIV]

The Eerie Parallels Between AI Mania and the Dot-Com Bubble​

This argument isn't new, but James Mackintosh of the WSJ puts a few comparisons side-by-side between the Dot-Com Bubble and the current state of the AI market:

A few notable points:

Current Valuations:

There are lots of ways of valuing stocks, and pretty much all of them make U.S. shares look the most expensive since the dot-com bubble.

Uncertainty:

Just as the dot-coms were priced based on hope that the internet would deliver a new era of profits from business models that were yet to be proven, so with AI. Generative AI has delivered chatbots and image generation that seem to be not far from magic—but is, for now, priced well below what it costs to produce, leading to big losses at AI businesses.

Investment:

Well over $100 billion being sunk into new telecom networks in the late 1990s. There was so much fiber that much of it ended up mothballed for a decade before internet traffic expanded enough to justify using it.

The race to build data centers is even more extreme, with investment figures in the trillions thrown around by leading AI developers. Spending is so large that economists say it’s making up a significant share of gross domestic product growth.

Bubble Talk

Some say if everyone is talking about a bubble, it’s a sign there isn’t one. Yet bubble arguments raged in 1999 even as it continued to inflate. The same is happening now.