Everyone's wondering if, and when, the AI bubble will pop. Here's what went down 25 years ago that ultimately burst the dot-com boom | Fortune

"The similarities are striking. Like the internet companies of two decades ago, AI firms today attract massive investments based on transformative potential rather than current profitability. Global corporate AI investment reached $252.3 billion in 2024, according to research from Stanford University, with the sector growing thirteenfold since 2014. Meanwhile, America's biggest tech companies- Amazon, Google, Meta, and Microsoft-have pledged to spend a record $320 billion on capital expenditures this year alone, much of it for AI infrastructure."

"Even OpenAI CEO Sam Altman, whose company is valued at approximately $500 billion despite launching ChatGPT just two years ago, acknowledges the parallels. "Are we in a phase where investors as a whole are overexcited about AI? My opinion is yes," Altman said in August. "Is AI the most important thing to happen in a very long time? My opinion is also yes.""

"The dot-com crash wasn't triggered by a single event, but rather a convergence of factors that exposed fundamental weaknesses in the late 1990s tech economy. The first critical blow came from the Federal Reserve, which raised interest rates multiple times throughout 1999 and 2000. The federal funds rate climbed from around 4.7% in early 1999 to 6.5% by May 2000, making speculative investments less attractive as investors could earn higher returns from safer bonds."

AI firms are attracting massive capital based on transformative potential rather than current profitability. Global corporate AI investment reached $252.3 billion in 2024 and the sector has grown thirteenfold since 2014. Major technology companies pledged roughly $320 billion in capital expenditures, much directed toward AI infrastructure. Industry voices express both concern that investors may be overexcited and conviction that AI is historically significant. The dot-com collapse resulted from a convergence of factors including repeated Federal Reserve rate hikes, a global recession beginning in Japan, and a rapid reassessment of highly valued but unprofitable internet companies.

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