Company Equity Plunges show how AI Boom Stall's financial fallout is much larger than dot com bust. Eric Gordon told Business Insider.
Gordon, professor of entrepreneurship, studying financial markets and technology at the University of Michigan Ross School of Business; Previously, the AI boom was called the “magnitude overestimation bubble.”
Some investors say that AI bullish, surge in high-tech stocks in the early 2000s would crash like Dot-Com companies, but other investments such as Kevin O'Leary have rejected the comparison.
Gordon contrasted with the market value of Pets.com, an online pet supply retailer called “Poster Bozo” of AI infrastructure startup Dot-Com Mania, which was released in March.
Nvidia-backed CoreWeave shares have fallen 33% over the past two days, wiping down around $24 billion from its market capitalization, and “many investors suffer from the dot-com conflict, making the suffering even more painful,” Gordon said. The fall comes after the company's latest revenues showed widening losses and infrastructure constraints.
Backed by Amazon and several well-known VC companies, Pets.com secured a market value of $410 million in February 2000 at its peak. However, within the next 12 months, the company declared bankruptcy, said it would settle its assets, and the shares were registered.
“If we assume that all $410 million was lost, the loss was smaller compared to what we might see with AI,” Gordon said.
CoreWeave shows just how big a sudden and serious loss is for shareholders, Gordon said. The loss on market capitalization is almost 60 times the market capitalization of Pets.com. CoreWeave shares closed at around $100 per share on Thursday, with a listing price of over $40.
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“It's necessary for hype-driven tech stocks to immediately destroy $20 billion in wealth,” Gordon said.
CoreWeave did not immediately respond to requests for comment from Business Insider. CEO Michael Intrator said in a statement on revenues that he “showed continuous momentum across all aspects of our business.”
Due to the collapse of the DOT-COM bubble, S&P, including dividends, fell by about 9% in 2000, 12% in 2001 and 22% in 2002.
The High Tech Titans account for a large portion of the value of the US stock market, and their profits and market control have made them a mainstay in their retirement portfolio and pension funds.
In 2022, Gordon told Business Insider that 25 years ago, more people were invested in AI than DOT-COM companies. He predicted there would be a “bowl of spaghetti” after the AI boom burst. Because people who get burned in a slump will save money by cooking at home and reduce costs as much as possible.
Speaking to Business Insider last week, O'Leary said the AI boom was “not the same hype as the internet bubble, because today you can actually look at productivity and measure it by dollar.”
