The Looming AI Bubble. Is History Repeating Itself?
As I sit here in my home office, surrounded by gadgets that seemed like science fiction just a decade ago, I can’t help but feel a sense of déjà vu. The AI boom we’re experiencing right now reminds me so much of the dot-com era that my parents lived through in their early careers.
It’s exciting, it’s revolutionary, but it’s obviously concerning.
Remember the late ‘90s? The internet was going to change everything, and investors couldn’t throw money at dot-com companies fast enough. Fast forward to 2024, and it feels like we’re watching the same movie with a different cast: AI. It’s everywhere!
Let me break down why I’m getting those familiar butterfly-in-stomach feelings:
Stocks on Steroids
Just last week, I was checking stocks and did a double-take. AI-focused stocks have gone through the roof! We’re talking increases of over 1,000% in some cases. Super Micro Computer? Up 1,231%. Nvidia? A “modest” 300% climb. Back during the dot com era, Pets.com surged quite similarly.
Valuations That’ll Make Your Head Spin
Seems like yesterday when I’d laugh at the idea of companies with no profits being valued in the billions. Well, AI companies are being valued at levels that make my calculator weep.
Nvidia, in particular, is raising eyebrows. Don’t get me wrong, they’re doing amazing things, but at what point does the hype outpace reality?
The Hype Machine is in Overdrive
Every conference I attend, every tech podcast I listen to — it’s all AI, all the time. There’s this pervasive “fake it till you make it” vibe that’s eerily familiar. Companies are promising the moon and stars, but I’m starting to wonder if they can really deliver all of it.
Show Me the Money… Or the Lack of It
Here’s the kicker — for all the talk about AI revolutionising everything from healthcare to how I order my morning coffee, most of these companies aren’t turning a profit. The costs of developing and maintaining these AI systems are astronomical. It reminds me of when people thought eyeballs were more important than revenue. Spoiler alert: They weren’t more important.
The Echoes of Wise Voices
“This bubble in the US is eerily similar to the 2000 Tech Bubble” — Jeremy Grantham
I’ve been following Jeremy Grantham for quite a while now, and when he starts drawing parallels between the AI boom and the dot-com crash, I listen.
The pattern of tech stocks with lofty growth projections outperforming the market is very similar to the late 1990s.
The Million-Dollar Question: When Will It Pop?
If I had a crystal ball, I’d be writing this from my private island. But the truth is, no one knows exactly what will burst this bubble. Will it be regulators finally catching up? Investors waking up one day and realising the emperor has no clothes? Or maybe we’ll all suddenly become very concerned about the massive energy consumption of these AI systems (climate change is real, folks).
What’s Next?
Look, I’m not saying AI isn’t revolutionary. It is. I use ChatGPT a lot, and it’s mind-blowing. But we need to separate the wheat from the chaff. Most experts believe this bubble will burst within the next year. It’s going to be painful, no doubt about it. But you know what? It might be exactly what the industry needs.
After the dot-com bubble burst, we got Web 2.0, social media, and the mobile revolution. Maybe, just maybe, the aftermath of the AI bubble will give us something even more incredible — an AI industry built on solid foundations rather than just hype and dreams.
In the meantime, I’ll be here, watching the roller coaster with a mix of excitement and trepidation, making sure my portfolio isn’t overexposed to companies promising AI-powered everything. Everyone reading this should ideally do the same. Watch closely.
