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Is the AI Market Overheated Like the Dot-Com Era
Artificial intelligence has been called the biggest technological revolution since the Internet. From Wall Street to Martin Place, investors are pouring money into anything labelled “AI,” sending share prices soaring at a pace rarely seen before. But for those who remember the dot-com bubble of the late 1990s, the current hype feels familiar.
The key question: Is the AI boom of 2025 just another speculative bubble, or the foundation of something truly sustainable?
The AI Boom by the Numbers
The growth in AI has been nothing short of explosive.
Nvidia surged past a US$4 trillion market cap in 2025, briefly becoming the world’s most valuable company.
Palantir has reinvented itself as an AI-first company, enjoying a massive rerating.
AMD is riding the GPU demand wave as a challenger to Nvidia.
Startups like Mistral AI (€12B valuation) and Anysphere (US$10B valuation) raised billions in record-breaking rounds.
This frenzy has drawn comparisons to the IPO boom of the 1990s, where companies listed on promises rather than profits.
Lessons from the Dot-Com Era
The dot-com crash of 2000 showed that:
Not every company survives disruptive shifts.
Valuations based purely on hype eventually correct.
Yet, true winners like Amazon, Google, and eBay went on to dominate global markets.
The lesson is clear: technology can change the world, but investors must be selective.
Similarities Between AI & Dot-Com
Narrative of unstoppable transformation.
Valuations disconnected from profitability.
Fear of Missing Out (FOMO) among retail & institutional investors.
Flood of IPOs and venture funding.
Gains concentrated in a few mega-caps (Nvidia, Microsoft, Alphabet).
Key Differences This Time
Tangible adoption: AI tools are already integrated into Microsoft Office, healthcare, and customer service.
Big Tech backing: Trillion-dollar giants like Microsoft and Google fund the ecosystem.
Profitable leaders: Nvidia’s GPUs generate strong free cash flow.
More experienced markets: Investors and regulators are more cautious than in 1999.
Risks Investors Must Watch
Extreme valuations – companies priced for perfection risk sharp corrections.
Overinvestment – too many players chasing the same AI opportunities.
Regulation – new frameworks on AI ethics, privacy, and IP may add costs.
Macroeconomics – higher interest rates or inflation could dampen risk appetite.
Tech disruption itself – today’s model may be obsolete in 2 years.
A Framework for Investors
Infrastructure layer (chips, cloud, data centres): Strong moat, likely to endure.
Platform layer (AI models, APIs): Opportunities exist, but competition is fierce.
Application layer (AI startups): Highest risk, limited differentiation.
Best practices:
Focus on fundamentals (revenue, margins, customer retention).
Diversify AI exposure rather than overloading portfolios.
Scale positions based on milestones, not hype.
Conclusion: Bubble or Building Phase?
The AI boom of 2025 shows elements of a bubble — sky-high valuations, speculative IPOs, and hype-driven capital. But unlike 1999, AI has real-world adoption, solid cash flows from leaders, and Big Tech support.
The coming years will separate winners from pretenders. Investors must distinguish hype from reality — because while bubbles burst, transformational technologies always leave behind enduring giants.
⚠️ Disclaimer
This article is for informational purposes only and does not constitute financial advice. Always conduct your own research or consult with a professional financial advisor before making investment decisions.