What if AI is the next dot-com bubble?

The surge in multi-billion-dollar investments in artificial intelligence has sparked growing debate about whether the industry is headed toward a bubble similar to the dot-com boom.

Investors are closely watching for signs that enthusiasm may be fading or that heavy spending on infrastructure and chips is failing to deliver expected returns. A recent survey by BofA Global Research found that 54% of fund managers believe AI stocks are already in bubble territory, while 38% disagree.

Echoes of the dot-com era

Despite the optimism surrounding artificial intelligence, skeptics remain unconvinced of its real-world impact. Some even call it a hoax or a bubble waiting to burst.

Speaking at Cisco’s recent Virtual Media Roundtable – AI Readiness Index 2025: Readiness Drives Value, Ben Dawson, senior vice president and head of Asia Pacific, Japan and Greater China (APJC), compared the current wave of AI hype to the early days of the Internet. Technology transitions of this magnitude often follow a familiar pattern — early excitement, large investments, and an eventual market correction before long-term value takes hold, he said.

Dawson noted that while some AI projects or business models may not last, the overall transformation is real and lasting. He added that, as with the Internet revolution, artificial intelligence will permanently reshape business and society, and organizations that ignore it do so at their own peril.

policy">The role of governments and global politics

Public policy is also shaping how the AI ​​cycle unfolds, and how governments can mitigate the risks of a potential AI bubble. like Harvard Business Review As he noted, in the United States, government involvement helped define past technology eras—often through incentives and early investments that encouraged private innovation. The same pattern is now visible in AI. Both the Trump and Biden administrations have positioned AI as a matter of economic power and national security, sending a clear message that speed matters.

China has taken a state-led approach, directing capital toward domestic AI companies to reduce dependence on American technology. In Europe, efforts have focused more on regulation, although fears of over-regulation have led to new programs – such as the Continent’s AI Action Plan and the €1 billion AI Implementation Fund – to boost adoption and competitiveness.

On the other hand, venture capital funds and sovereign wealth funds are investing heavily, even before widespread demand for AI emerges. These early bets assume that adoption will eventually justify construction. But if that demand slows, some investors may find stranded assets, more like the unused fiber networks that followed the dot-com bubble.

As for companies, the challenge is different. Instead of funding the next infrastructure wave, these companies are faced with the question of how to use AI to enhance their operations. Companies that have survived the dot-com decline — like Amazon — have succeeded in aligning technology with real business value rather than market hype.

Market warnings about a potential AI bubble

The Bank of England recently warned that markets could suffer a sharp correction if confidence in AI falters, describing the potential impact on the UK financial system as “material”. This warning reflects growing caution among policymakers about how quickly valuations associated with artificial intelligence can rise.

This concern is shared by some investors and economists who believe that the rapid pace of spending on artificial intelligence may outweigh the returns in the short term. However, others see building AI infrastructure now as an essential foundation for future innovation.

Building long-term AI infrastructure amid bubble fears

When asked if companies are concerned about AI infrastructure costs and energy demand, Simon Miceli, managing director of cloud infrastructure and AI for APJC at Cisco, said he looks at the issue from the opposite angle.

Instead of fear of excess capacity, he said what is happening now is large-scale construction to support artificial intelligence manufacturing. He said the question is not whether the demand for artificial intelligence exists today, but whether the world is preparing quickly enough for what is coming.

Miceli acknowledged that some correction in the AI ​​market is likely, but he believes the long-term need for AI computing power justifies current investment levels. “There is a race to develop artificial intelligence and build the capabilities behind it,” he said, adding that demand will eventually meet supply as applications mature.

Different shades of caution

Opinions vary across the industry on whether AI momentum represents healthy growth or hype.

according to ReutersAt the Milken Institute Asia Summit 2025, Brian Yeo, chief investment officer at Gulf Investment Corporation in Singapore, said valuations in early-stage AI projects appear inflated, with many startups getting “huge multiples” despite modest revenues. He noted that while some companies may justify their valuations, others are unlikely to deliver returns that match investors’ expectations.

Amazon founder Jeff Bezos said that during periods of excitement like these, investors often struggle to separate the good ideas from the bad — though he also noted that innovation-driven bubbles often leave behind real progress once the market stabilizes.

At Goldman Sachs, economist Joseph Briggs claimed that the current increase in spending on AI infrastructure remains economically sustainable. He said the long-term case for investing in AI is strong, but the ultimate winners are still uncertain given how quickly technology changes and how easily companies can change providers.

Meanwhile, ABB CEO Morten Wierud said Reuters Although he doesn’t see an AI bubble, supply chain and construction limits could slow the rollout of new data centers. IMF Chief Economist Pierre-Olivier Gorinchas added that even if there is a decline, it is unlikely to cause a systemic financial crisis because AI investments are not driven by debt.

Sam Altman, CEO of OpenAI, also acknowledged the overexcitement in the market, predicting that some investors would lose big while others would make big profits — an outcome that mirrors previous tech bubbles.

Despite growing talk of an AI bubble, many investors remain committed to the sector. About 90% of investors who believe the market is overheated still hold AI-related assets, suggesting that most believe the industry has not yet peaked, equity strategists at UBS said.

Cycle, not collapse

While concerns about an AI bubble are valid, most experts agree that the technology’s long-term impact is undeniable. As Cisco’s Ben Dawson said, every major technology transformation goes through a cycle of hype, patching and consolidation — but what sticks around afterwards reshapes industries for decades.

Right now, the question is not whether AI will stick around, but how well companies and investors can weather the growing pains that come with each market bubble.

(Photo by Grotica)

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