This week, the stock market surged once again, reaching its all-time high. Again, financial market profits were driven by a small number of companies focused on artificial intelligence.
Tech giants like Meta and Nvidia have seen their value surge as investors wait breathlessly to reveal their open, humanitarian and bewilderment.
But due to all the enthusiasm, some investors are worried. They say we had been on this path before. And they point to the dot com bubble in the 1990s. When tech companies spike in value, we can only see the bubble burst in early 2000.
“The difference between the IT bubble of the 1990s and the AI bubble today is that the top 10 S&P 500 companies today are overrated than in the 1990s,” says Torsten Sløk, chief economist at economic research firm Apollo, citing in a note on his website whether it exceeds price and band stocks.
In other words, he says that this time the bursting bubbles may be even worse. And it says something.
The 1990s dot com bubble had many similarities to today's market. New technology provided a way to change the potential game. Everyone wanted that.
When the bubble bursts
Many of today's large companies were founded in the early days of the Internet. Companies such as Apple, Amazon, and Microsoft were key pillars of the wave of new technology companies at the time.
However, the other giants of the day failed, and were wiped out when the bubble burst. Companies such as Pets.com, Boo.com and Worldcom have collapsed after raising hundreds of millions of dollars.
From 1995 to March 2000, the NASDAQ index rose 80%. The bubble then bursts. By October 2002, the Nasdaq had reduced its incredible 78% from its peak, 78%, wiping away all profits it had gained during the bubble.
It is not difficult to find similarities in the market today. Investors gather in spaces that they don't fully understand before the underlying technology use case application is established.
The real economy is struggling to find its foothold amidst all the chaos and uncertainty associated with Trump's trade war and unaddressed tariffs.
Job growth slowed, and the US economy contracted in the first three months of the year.
Some of America's biggest companies are plagued by tariff costs. According to GM, tariffs have led to a $1.1 billion decline in profits. Ford recorded its first quarterly loss in years.
Still, stocks are the highest ever, and there's a clear sense of FOMO (fear of missing out).
“Every bubble in modern market history is based on stories, whether it's the internet or real estate,” writes Wall Street trader Tom Essay in a report in his newsletter Sevens.
“AI technology is definitely the subject that potentially bubbles are today.”
Something that looks different this time
But there are also some very obvious differences for all similarities.
Barry Schwartz joined investment company Baskin Wealth Management due to the bursting of the dot-com bubble. Today he is the company's president and chief investment officer.
“Unlike DOT-COM's pre-optional companies, these companies are profitable. They have global distribution, prisoner of war customers,” he said in an interview with CBC News.
Schwartz says Google, Apple, Meta and Amazon have billions of customers. He says those businesses will continue, whether AI will become a game changer or not. But if that's the case, those tech giants are ready to take advantage of it.
“So this isn't like chicken or eggs. The eggs and chicken are already on the table. The market understands that,” Schwartz said.
Front burnerInternal opening is a passionate pursuit of AI dominance
US President Donald Trump Ai Zar and billionaire David Sachs say most people don't fully understand where AI development is at the moment.
“The Dwemer story was wrong,” he posted on social media platform X.
Sacks says the story was built on the notion that there is a rapid takeoff to artificial general information that drives one AI model to self-improve itself quickly enough to leave others in the dust.
But he says the opposition is happening.
“The main models cluster around similar performance benchmarks,” he wrote in his lengthy post last week. “Model companies keep popping out from each other with the latest version.”
More importantly, these models (such as Openai's ChatGpt, X's Grok, and Google's Gemini) are building what he calls “areas of competitive advantage.”
Openai and other leading tech companies are beginning to unfold the next wave of artificial intelligence, designed to operate with more autonomy. CBC's Nora Young breaks down the way Agent AI works and why some people think it will change the way the Internet is used.
Therefore, from a market perspective, a small number of AI models compete soundly with each other. Meanwhile, the High-Tech Giants (Apple, Amazon and Meta, to name a few) are actively adapting AI to their business models.
And chip makers like Nvidia can barely keep up with the insatiable demand developed by all these companies.
If appropriate, Nvidia has not only seen its stock take off. The revenue is so large that it's difficult to wrap your head around. Since 2022, Nvidia's income has been typical. That profit has increased by more than ten times.
Uncertainty about tariffs – Even with technology
The repeated fear of dotcom bubbles may be legal.
But for now, a more pressing threat is that financial markets begin to price the impact of the World Trade War. Multiple corporate revenue reports show that tariffs are already biting deep.
Automakers like GM and Ford have led the fare, but tech companies are not immune.
According to Apple, tariff-related costs will rise to $2 billion through the first half of this year.
Schwartz says he knows how dangerous it is to think “it's not this time.” However, he says that the problem is summarised into a very simple calculation.
“It comes down to one simple question: Do you think we'll use more AI and data in the future?” he said.
And obviously, a quick look at the market shows that most investors are betting the answer.
