Remember the internet in the late 90s? The buzz, the dizzying valuations, the overnight millionaires, and then… the sudden, painful crash. It was a rollercoaster that reshaped our economic landscape, leaving behind both cautionary tales and titans like Amazon. Fast forward to today, and a very similar question is rippling through boardrooms and investment funds: Is the meteoric rise of Artificial Intelligence (AI) the next dot-com bubble waiting to burst?
Billions upon billions are pouring into AI — for chips, for infrastructure, for innovative startups promising to revolutionize everything. The excitement is palpable, but so is a growing unease. A recent BofA Global Research survey found that over half of fund managers believe AI stocks are already in bubble territory. So, are we witnessing an unprecedented technological leap, or simply another speculative fever dream?
Echoes of the Early Internet: Hype, Investment, and Inevitable Correction
The parallels between today’s AI frenzy and the dot-com era are hard to ignore. We’re in an exhilarating phase of rapid technological advancement, fueled by immense capital and sky-high expectations. It feels a lot like 1999, doesn’t it?
Ben Dawson, Cisco’s Senior Vice President and President for Asia Pacific, Japan, and Greater China (APJC), certainly sees the resemblance. He suggests that shifts of this magnitude often follow a predictable pattern: an initial wave of excitement, heavy investment, a market correction, and only then, the emergence of true, long-term value. It’s a natural cycle of technological evolution, not necessarily a sign of impending doom.
Of course, not every AI project or business model will survive the journey. We’ll likely see a culling, much like the dot-com bust weeded out many internet startups that lacked sustainable business models. But Dawson argues that the overall transformation AI brings is real and lasting. Ignoring it, he warns, would be a risk no organization can afford.
This isn’t just about flashy new apps; it’s about a foundational shift. Much like the internet forever changed how we connect and do business, AI is poised to fundamentally reshape industries, economies, and societies.
Building Tomorrow’s Foundation: Infrastructure Amidst Uncertainty
One of the most striking aspects of the current AI boom is the sheer scale of infrastructure investment. We’re talking about massive spending on specialized chips, data centers, and energy to power these complex systems. Is this reckless overspending, or necessary groundwork?
Simon Miceli, Cisco’s Managing Director of Cloud and AI Infrastructure for APJC, sees it as the “industrialisation of AI.” He frames it not as a fear of overcapacity, but as a critical buildout for what’s to come. For Miceli, the question isn’t whether current demand justifies the investment, but whether we’re preparing fast enough for the inevitable explosion of AI applications. A market correction might be on the horizon, he concedes, but the long-term need for AI computing power will ultimately justify today’s investments.
The Role of Governments and Global Policy
Adding another layer to this narrative is the active role governments are playing. This isn’t just a free-for-all venture capital playground. In the US, both the Trump and Biden administrations have positioned AI as crucial for economic strength and national security, signaling a clear imperative for speed and investment. This kind of top-down support, reminiscent of past technology eras, can stabilize and direct private innovation.
China, on the other hand, has adopted a state-led approach, channeling capital into local AI firms to reduce reliance on foreign technology. Europe, while initially focusing on regulation, is now also pushing initiatives like the AI Continent Action Plan and a €1 billion “Apply AI” fund to boost adoption and competitiveness. These national strategies suggest a deep, long-term commitment that goes beyond speculative fads.
However, venture capital and sovereign wealth funds are also making huge early bets, often before widespread demand for certain AI applications fully exists. If that demand slows, some investors could indeed be left with “stranded assets”—unused computing power or data centers—echoing the unused fiber networks left after the dot-com bust. It’s a risk, but perhaps a calculated one given the potential upside.
Navigating the Nuances: Diverse Views on the AI Horizon
The debate around an AI bubble isn’t monolithic; opinions vary widely, even among the sharpest minds. This diversity itself is a sign of a complex, evolving market, rather than a simple ‘yes’ or ‘no’ answer.
Bryan Yeo, GIC’s Chief Investment Officer, notes inflated valuations in early-stage AI ventures, with some startups commanding “huge multiples” despite modest revenues. He’s right to caution that many of these won’t deliver returns commensurate with their current price tags. It’s a familiar story for anyone who’s watched a tech boom unfold.
Jeff Bezos, a veteran of the dot-com era, offers a more nuanced perspective. He acknowledges that in periods of intense excitement, it’s incredibly hard to distinguish truly good ideas from bad ones. Yet, he also points out that innovation-driven bubbles, despite their eventual burst, often leave behind significant, real progress. The market corrects, but the underlying technology endures and thrives.
Economist Joseph Briggs from Goldman Sachs believes the current surge in AI infrastructure spending is economically sustainable. While the long-term case for AI investment is strong, he wisely points out that the ultimate winners are still uncertain given the rapid pace of technological change and ease of switching providers. This suggests that while AI itself is here to stay, specific companies or solutions might not.
Even the Bank of England has sounded a warning, suggesting that a faltering of confidence in AI could lead to a “material” correction in financial markets. But even in a downturn, IMF Chief Economist Pierre-Olivier Gourinchas suggests a systemic financial crisis is unlikely because current AI investments aren’t predominantly debt-driven, a key difference from many past market crashes.
Interestingly, OpenAI CEO Sam Altman, at the heart of the AI revolution, has also acknowledged market overexcitement, predicting that some investors will lose heavily while others will profit — a classic outcome of any transformative technology wave. Yet, despite these warnings, UBS equity strategists report that roughly 90% of investors who believe the market is overheated are still holding AI-related assets. This suggests a widespread belief that AI’s peak is still ahead.
A Cycle, Not a Collapse
So, what’s the takeaway? The consensus among many experts, including Cisco’s Ben Dawson, is that AI represents a major technological transition undergoing a predictable cycle of hype, correction, and eventual consolidation. It’s less a question of “if” a correction will happen, and more about “when” and “how deep.”
The long-term impact of AI is, by all accounts, undeniable. It will reshape industries for decades to come. The real challenge for businesses and investors isn’t to avoid the cycle, but to navigate its growing pains wisely. Those who survived the dot-com downturn—companies like Amazon—did so by relentlessly aligning technology with real business value, not just market hype. The same principle holds true for AI. Success will belong to those who look beyond the immediate frenzy and focus on how AI can truly strengthen operations, enhance human capability, and create lasting value.
