Well TECH-nically – The AI bubble

Artificial Intelligence is a rapidly growing business sector, with investments in big development companies increasing by year, more job positions offered related to AI, and the emergence of data centres that are causing a computer RAM (random access memory) shortage. We, as a society, are experiencing what is referred to as the AI boom right now. However, some sceptics have compared the growth trend of AI to the dot-com bubble and are theorising that the value of AI stocks will soon come crashing down thus suffering the same fate as the dot-com bubble.    

A ‘bubble’ in the financial context is defined by Merriam-Webster as “a state of booming economic activity that often ends in a sudden collapse.” Additionally, according to CMC markets, a stock-market bubble is when share prices of stocks keep rapidly climbing until a point where their value exceeds that of their intrinsic worth or earnings, and when the bubble eventually bursts and prices drop, it leads to a stock market crash. In other words, the consequence of a stock-market bubble bursting is the rapid decrease in share prices, and large groups of people will incur great losses.  

Why exactly is the current AI trend being compared to the dot-com bubble? Well, there appears to be a number of similarities between the two

During the late 1990’s, the internet was undergoing a substantial change. Up to this point, it had been used primarily for academic purposes; it was now being transformed for widespread use amongst the public. Hence, it was also seen as a prime business opportunity for certain startups to begin publishing their respective websites online, promising to rake in huge profits to investors thus driving up their stock market value. Unfortunately, many of these startups, such as Pets.com, 360networks, and eToys.com, failed to deliver on their promises and had to declare bankruptcy. After the dot-com bubble burst, only a small number of companies survived – Amazon, eBay, and Cisco being amongst them, found great success in this market and morphed into the big companies that they are today. 

Why exactly is the current AI trend being compared to the dot-com bubble? Well, there appears to be a number of similarities between the two: both events involve new and promising technology being spread to the public that have become incredibly successful. Secondly, when the interest in these areas boomed, there came the startups attempting to ride on its success and achieve profit. Finally, the stock market for both booms have experienced rapid growth – during the dot-com bubble, investments in the Nasdaq Composite market index rose by 600%, and so far companies such as Micron and LRCX (semiconductor equipment and materials producer) have seen their AI stocks rise by 240% and 138%, respectively.  

AI offered a chance of growth in enterprise activity, which would solidify its standing compared to only appealing to the general consumer, as most of the dot-com startups were limited to.

A study by MIT published in July 2025, titled ‘State of AI in Business 2025’, declares: “Despite $30-40 billion in enterprise investment into GenAI, this report uncovers a surprising result in that 95% of organisations are getting no return.” Of course, there are AI models and companies gaining huge profit from their investments; however, it resides at a measly 5%, and it is worrying that so much trust and money is being poured into this technology.   

It should be noted that the AI sector and the dot-com bubble have their differences, thus making it troublesome to predict how the AI market ends up developing. For example, most investment is being funded into the biggest AI companies instead of the individual startups, marking a difference with the dot-com era, where money was being funded into every new dot-com project. Another key difference, stated by the Bloomsbury Security and Intelligence Institute, is that AI offered a chance of growth in enterprise activity, which would solidify its standing compared to only appealing to the general consumer, as most of the dot-com startups were limited to.   

So, is there an AI bubble after all? All I can say is this: from what we have observed in terms of similarities between the status quo and past bubbles, it might be worth adopting an air of caution regarding how the market and respective companies perform. If there is a bubble and a crash happens, who knows which companies will fly too close to the sun, and which ones end up rising from the ashes? It is never the large corporations or major investors that are at the biggest risk – it is the individuals that get swept up by the tide of excitement and do not have a fallback should it all come crashing down.