--- title: "AI Is Starting to Look Like the Dot Com Bubble" description: "As the AI market continues to balloon, experts are warning that its VC-driven rise is eerily similar to that of the dot com bubble." date: "2023-08-11" modified: "2023-08-11" authors: - name: "Maggie Harrison Dupré" job_title: "Senior Staff Writer" link: "https://futurism.com/authors/mharrison" url: "https://futurism.com/ai-dot-com-bubble" categories: - "Artificial Intelligence" tags: - "ai" - "ai industry" - "bubble" - "venture capital" --- # AI Is Starting to Look Like the Dot Com Bubble ![As the AI market continues to balloon, experts are warning that its VC-driven rise is eerily similar to that of the dot com bubble.]() *\Image: Getty / Futurism\* As the AI industry's market value continues to balloon, experts are warning that its meteoric rise is eerily similar to that of a different — and significant — moment in economic history: the dot com bubble of the late 1990s. The dot com bubble — and subsequent crash — was an era [defined by]() a gold rush-like frenzy and inflated valuations. Hungry to cash in on a new, lucrative age of technology, venture capitalists took to throwing large sums at companies that, though they made all the right promises about their ability to change the world, had yet to actually prove their viability. And when the vast majority of these ventures ultimately fell short, they failed, swallowing roughly $5 trillion in fundraising as they sank into www dot oblivion. Fast forward to today, [as *The Wall Street Journal* details in a new report](), and that same gold rush energy is [palpable]() in the burgeoning AI marketplace. VCs are all too happy to pour massive amounts of cash into a growing constellation of AI firms, even those that have yet to [turn a profit](). Or, for that matter, have yet to even introduce a [discernible product](). Company leaders, meanwhile, continue to make [sweeping claims]() about the transformational power of their tech, which they consistently argue could save the world, [destroy it](), or — conveniently — [both](). Investors keep biting, and, per the *WSJ*, the stocks keep rising — shares of Nvidia, for example, the chipmaker whose GPUs are sought after for AI projects, have *tripled* in value this year, while tech giants like Meta, Microsoft, and Amazon, which are all working on AI tech, have seen their stock prices skyrocket by 154 percent, 65 percent, and 35 percent, respectively. And yet, though the tech *is* impressive, its true value — nevermind path to profitability — is still wildly unclear. "There's a huge boom in AI — some people are scrambling to get exposure at any cost, while others are sounding the alarm that this will end in tears," Kai Wu, founder and chief investment officer of Sparkline Capital, told the *WSJ*. "Investors can benefit from innovation-led growth, but must be wary of overpaying for it." Another striking similarity between AI and dot com? Market concentration. Per the *WSJ*, the ten biggest stocks in the S&P 500 right now make up more than a third of the total market, and this "concentration of leadership," as Mike Edwards, the deputy chief investment officer at the firm Weiss Multi-Strategy Advisers, told the *WSJ,* is "the market story that rhymes most with the internet bubble." But while the comparisons between these economic times certainly shouldn't be ignored, there are some big differences as well. Most notable is that most of the biggest players in the AI industry are longtime Silicon Valley behemoths, and have been working on developing the technology for a while. Think Google, Meta, Microsoft, Amazon, and so on. Some of these firms are even dot com survivors, and for decades have been able to keep themselves afloat amid various technological trends. And sure, a fair share of newer companies have entered the public mainstage. But even the most prominent newbie of the bunch, the heavily Microsoft-funded OpenAI, was founded by a gaggle of Silicon Valley vets — Sam Altman, Peter Thiel, Reid Hoffman, since-defected Elon Musk, et al — with deep tech industry ties. The same goes for ventures like Character.AI and Humane Inc., founded by ex-Google and Apple executives, respectively. "It's not like 1999 when investors were racing to hot IPOs for companies that had no chance of making money," Edwards told the *WSJ*. "Today's winners are disciplined, enormous companies that have moats in place and data sets to exploit." Still, even the most seasoned companies, executives, and VCs can get too caught up in the [hype of it all](), and may well stumble in the race to establish their dominance and relevancy in a changing technological landscape. Plus, as a general rule, a high-dollar feedback loop never feels particularly healthy, and cracks in some leading industry players are already [starting to show](). As a select few dot com firms did, some AI ventures will likely stick around. But a lot of them probably won't, and given what we know about the ghosts of dot com's past, wariness — something often lost in the fog of war — is more than warranted. **More on AI:** [*The Company Behind Stable Diffusion Appears to Be Crumbling into Chaos*]() ## Author At Futurism, I've reported extensively on the rise of AI as a cultural and business force shaping the media industry, and more broadly how those dynamics are changing how we all consume and share information and relate to one another. I'm also fascinated by public health policy and ethics, the role of emerging tech in politics and governance — and the powerful people and forces at those intersections — climate change, and the environment. My investigation on Sports Illustrated's use of AI-generated authors with fictional biographies won a 2024 Mirror Award for "Best Story on Media Coverage of Artificial Intelligence in Journalism and the Media" from Syracuse University's SI Newhouse School, I contributed to Niemen Lab's 2025 Predictions for Journalism series, and I've discussed my work for Futurism during appearances on NPR, CNN, the BBC, the CBC, and more. I grew up in rural Pennsylvania and attended the University of Massachusetts Amherst, where I played Division I field hockey for the Minutewomen as a midfielder. Since then, I've lived in New Orleans, Louisiana and Manhattan, New York. I spend my free time running, reading, perusing archival fashion, and searching for the world’s best negroni. I also have a debonair tuxedo cat, Westley, who's named after "The Princess Bride." ### Author social links [Bluesky]()