Are we in an AI bubble, similar to the dot-com bubble that burst in the early 2000s? Stock market analysts have been sounding the warning bells for the last year, but those warnings just got louder—and some are answering with a resounding yes.
One thing that’s got market watchers worried: While the S&P 500 closed out May on a record high (largely driven by semiconductors), only a few of those 500 companies—just 20 to be exact—hit their own all-time highs. That’s a similar pattern that occurred during the dot-com internet bubble, according to CNBC.
As the stock market rises and shares of tech stocks hit historic $1 trillion valuations, there’s no arguing that the current stock-market boom is heavily driven by the results of a handful of mega-cap growth stocks, including the so-called Magnificent Seven (Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla.)
Back in 2018, only Apple had hit the $1 trillion mark; now that group collectively has a market capitalization of some $35 trillion and includes: SK Hynix, Micron, Samsung, Berkshire Hathaway, Meta, Tesla, Saudi Aramco, Broadcom, TSMC, Amazon, Alphabet, Microsoft, and Nvidia, per 24/7 Wall St.
What was the dot-com bubble and how is the market similar today?
The dot-com bubble “was characterized by a rapid rise in U.S. technology stock values in the late 1990s, driven by heavy investments in internet-based startups with little to no profits,” according to Investopedia.
Those internet startups raised significant capital to take their companies public, only to watch the bubble eventually burst. After driving the Nasdaq index up fivefold, the market collapsed nearly 77% by October 2002. Many companies went bankrupt, sparking a mass exodus from Silicon Valley.
Today, we are seeing artificial intelligence startups like Anthropic and OpenAI raise billions for their upcoming IPOs, while at the same time many tech companies are spending an unprecedented amount to build massive AI data centers—$700 billion in 2026 alone.
Meanwhile, much like 25 years ago, tech workers are facing rolling layoffs as Silicon Valley experiences another reported exodus.
The silver lining, if there is one: While we may be in an AI bubble, some analysts are saying it’s not over yet.
