If the AI boom were to collapse, it wouldn’t be as devastating as the dot-com crash, but the impact would be far-reaching, says Igor Pejic.
The banker and author of “Tech Money,” a new guide for tech investors, told Business Insider this week that Big Tech’s unprecedented dominance will limit the size of the market’s decline.
Pejic highlighted the greater “stickiness” of companies such as Alphabet and Microsoft compared to past giants such as Exxon Mobil, General Motors and IBM.
He said Big Tech companies have remained dominant for decades in part because of their platform model, which gives them “nearly unlimited pricing power” and makes them “nearly impossible to eliminate.”
In other words, it has become strongly entrenched by attracting a significant number of users, app developers, hardware suppliers, advertisers, and other stakeholders to the ecosystem over time. Now they can easily raise fees, and new market entrants have a hard time gaining market share from them.
Pejic also pointed out that Apple, Meta, and their peers have successfully navigated multiple technological changes, including the move from desktop computers to mobile devices and from on-premises IT equipment to cloud hosting.
Big tech companies are also spending huge amounts of cash to make several big bets at once, allowing them to finance their investments without relying on expensive outside capital. Pejic described this as a “moat” against rivals, especially in an AI race characterized by “huge infrastructure costs.”
shades of the past
Pejic drew some parallels between the AI boom and the dot-com bubble. He said similarities include innovative technology, partnerships and financing deals between major companies, building network infrastructure and “extreme” valuations.
But Pejic said the AI crash is “not as catastrophic as the dot-com bubble bursting.”
He said market declines will be shorter and less severe because today’s tech giants have profitable core businesses and their stock prices won’t completely collapse even if their AI bets fail.
And given its limited reliance on bank funding, it’s less likely to run out of cash or trigger a financial crisis, making investors more discerning about which AI stocks to buy, rather than rushing to own companies with “.com” in their names, he said.
Pejic raised several concerns, including the fact that so many companies are spending huge amounts of money to build the best AI models possible, but the market will likely only be able to support a small number of them in the end.
He also pointed out that with the rise of index funds that hold indexes such as the S&P 500, large amounts of investors’ cash, which is concentrated in the Magnificent Seven because it is weighted by market capitalization, is sitting in a small number of tech stocks.
“If things get really bad, it’s very difficult to find a place to hide,” Pejic said. “If you put your money in the stock market and the AI goes down, everything will be affected.”
He noted that the risks will only increase as AI giants such as OpenAI, xAI, and Anthropic go public and join indexes, increasing everyday investors’ exposure to AI.
Pejic said owning Big Tech stocks is “probably the safest way” to profit from AI, given their autonomy, vast resources and business diversification, which could limit downside share prices and protect them from industry shocks such as the rise of DeepSeek.
For example, he praised Apple’s approach in holding back on spending hundreds of billions of dollars on microchips and data centers in favor of waiting to see how the AI race unfolds and partnering with peers or acquiring capabilities to exploit the technology.
While Apple may not be the “most exciting company,” owning it is a “smart and very safe strategy for investors without wasting a lot of cash,” he said.