What if AI is the next dot-com bubble?

The surge of multi-billion-dollar investments in AI has sparked rising debate over whether or not the business is heading for a bubble just like the dot-com growth.

Investors are watching carefully for indicators that enthusiasm is perhaps fading or that the heavy spending on infrastructure and chips is failing to ship anticipated returns. A latest survey by BofA Global Research discovered that 54% of fund managers consider AI shares are already in bubble territory, whereas 38% disagree.

Echoes of the dot-com period

Despite the optimism surrounding AI, sceptics stay unconvinced of its real-world impression. Some even name it a bluff or a bubble ready to burst.

Speaking throughout Cisco’s latest Virtual Media Roundtable — AI Readiness Index 2025: Readiness Leads to Value, Ben Dawson, Senior Vice President and President for Asia Pacific, Japan, and Greater China (APJC), in contrast the present wave of AI hype to the early days of the web. He stated technological shifts of this scale typically comply with a well-known sample — early pleasure, heavy funding, and eventual market correction earlier than long-term worth takes maintain.

Dawson famous that whereas some AI tasks or enterprise fashions might not final, the total transformation is actual and lasting. He added that, very similar to the web revolution, AI will completely reshape enterprise and society, and organisations that ignore it achieve this at their very own danger.

The function of governments and world coverage

Public coverage is additionally shaping how the AI cycle unfolds — and the way governments would possibly cushion the dangers of a possible AI bubble. As Harvard Business Review identified, in the US, authorities involvement has helped outline previous expertise eras — typically by incentives and early investments that encourage personal innovation. The similar sample is now seen in AI. Both the Trump and Biden administrations have positioned AI as a matter of financial energy and nationwide safety, sending a transparent message that velocity issues.

China has taken a state-led method, directing capital towards native AI corporations to scale back reliance on US expertise. In Europe, efforts have centered extra on regulation, although fears of overregulation have led to new packages — equivalent to the AI Continent Action Plan and a €1 billion Apply AI fund — to spice up adoption and competitiveness.

Meanwhile, enterprise capital and sovereign wealth funds are investing closely, even earlier than widespread AI demand exists. These early bets assume that adoption will ultimately justify the buildout. But if that demand slows, some buyers could possibly be left with stranded property, very similar to the unused fibre networks that adopted the dot-com bubble.

For companies, the problem is totally different. Instead of financing the next infrastructure wave, they face the query of how one can use AI to strengthen their operations. The firms that survived the dot-com downturn — equivalent to Amazon — succeeded by aligning expertise with actual enterprise worth reasonably than market hype.

Market warnings over a potential AI bubble

The Bank of England not too long ago warned that markets may undergo a pointy correction if confidence in AI falters, calling the potential impression on the UK’s monetary system “materials.” The warning displays rising warning amongst policymakers about how shortly AI-related valuations have climbed.

This concern is shared by some buyers and economists who consider the speedy tempo of AI spending might outstrip short-term returns. Others, nonetheless, argue that constructing AI infrastructure now is important groundwork for future innovation.

Building long-term AI infrastructure amid bubble fears

When requested whether or not firms are apprehensive about AI infrastructure prices and vitality demand, Simon Miceli, Managing Director of Cloud and AI Infrastructure for APJC at Cisco, stated he views the situation from the reverse angle.

Rather than fearing overcapacity, he stated what’s occurring now is a large-scale buildout to help the industrialisation of AI. The query, he stated, isn’t whether or not AI demand exists right this moment, however whether or not the world is making ready quick sufficient for what’s coming.

Miceli acknowledged that some correction in the AI market is seemingly, however he believes the long-term want for AI computing energy justifies present funding ranges. “There’s a race to develop AI and construct the functionality behind it,” he stated, including that demand will ultimately meet provide as functions mature.

Different shades of warning

Across the business, opinions range on whether or not AI’s momentum represents hype or wholesome progress.

According to Reuters, at the Milken Institute Asia Summit 2025, Singapore’s GIC Chief Investment Officer Bryan Yeo stated valuations in early-stage AI ventures seem inflated, with many startups commanding “enormous multiples” regardless of modest revenues. He instructed that whereas some corporations might justify their valuations, others are unlikely to ship returns that match investor expectations.

Jeff Bezos, Amazon’s founder, stated that in intervals of pleasure like this, buyers typically battle to separate good concepts from dangerous ones — although he additionally famous that innovation-driven bubbles typically go away behind actual progress as soon as the market settles.

At Goldman Sachs, economist Joseph Briggs argued that the present surge in AI infrastructure spending stays economically sustainable. He stated the long-term case for AI funding is robust, however the final winners are nonetheless unsure given how shortly expertise modifications and the way simply firms can change suppliers.

Meanwhile, ABB CEO Morten Wierod informed Reuters that whereas he doesn’t see an AI bubble, provide chain and development limits may gradual the rollout of recent knowledge centres. IMF Chief Economist Pierre-Olivier Gourinchas added that even if there’s a downturn, it’s unlikely to trigger a systemic monetary disaster since AI investments aren’t debt-driven.

OpenAI CEO Sam Altman additionally acknowledged market overexcitement, predicting that some buyers will lose massive sums whereas others will revenue closely — an consequence that mirrors previous expertise bubbles.

Despite rising speak of an AI bubble, many buyers stay dedicated to the sector. UBS fairness strategists stated that about 90% of buyers who assume the market is overheated are nonetheless holding AI-related property, suggesting most consider the business has not but peaked.

A cycle, not a collapse

While considerations about an AI bubble are legitimate, most specialists agree that the expertise’s long-term impression is simple. As Cisco’s Ben Dawson put it, each main technological transition goes by a cycle of hype, correction, and consolidation — however what stays afterward reshapes industries for many years.

For now, the query isn’t whether or not AI will endure, however how effectively companies and buyers can navigate the rising pains that include each market bubble.

(Photo by Growtika)

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