A little over a year ago, I insisted that AI wasn’t a bubble like the one created during the dot.com era.[1] At the time, I noted that there was an absence of irrational exuberance. I wrote, “Today's business leaders expect to see a return on their investment in AI and they aren't investing blindly.” Over the past year, however, the hype has increased and investors have started to demonstrate a similar kind of irrational exuberance exhibited by investors during the dot.com era. Financial journalist Andrew Ross Sorkin, states, “I think it's hard to say we're not in a bubble of some sort. The question is always when is the bubble going to pop?”[2] Sorkin is not alone. The International Monetary Fund recently noted that similarities to the 1990s dot-com boom are now reflected in the current explosion of AI-related spending by U.S. companies.”[3] Pierre-Olivier Gourinchas, director of the IMF's research department, stated, “There are echoes in the current tech investment surge of the dot-com boom of the late 1990s. It was the internet then. It is AI now.”

Is the AI boom really a bubble?

Business journalist Shannon Carroll writes, “Silicon Valley is pouring concrete and capital like it’s building a new interstate. Data-center blueprints are swallowing whole ZIP codes, utilities are rewriting load forecasts, and megacaps are spraying cash at chips the way old industries sprayed it at oil rigs. The scale feels historic — and that’s exactly what makes investors twitchy.”[4] Deciding whether the AI boom is a bubble, isn’t as easy as it may sound. Carroll explains, “One camp says today’s run is expensive but earned — grounded in earnings power, cash-funded capex, and use cases that will eventually catch revenue up to rhetoric. Hyperscalers are spending at a clip that would have sounded deranged three years ago; chipmakers are booked out years; entire utilities are being redesigned to feed ‘AI factories.’ The other camp hears dot-com echoes: valuations are stretched, corporate adoption is lumpy, gains are clustered in a few AI-linked megacaps, returns are uneven, and the financing web powering AI has started to look rather circular as suppliers bankroll customers who then book orders back with the suppliers.”

Political Analyst Bruce Mehlman sees a bubble, but he isn’t sure when it will burst. In a recent weekly update, he indicated he was “On Bubble Watch.”[5] He cites Louis Gave, CEO of GaveKal, who states, “If it looks like a duck, swims like a duck, then chances are it is a duck. In that regard, the AI spending rollout does seem to have a lot of the attributes of a bubble: massive capital spending plans with very limited visibility of future returns, connected party transactions, and very stretched valuations.” As to when the bubble might burst, he cites Professor Scott Galloway who cautions, “The arc of the growth of OpenAI is kind of mimicking what happened with Netscape, and it’s at a point where it’s still two years away from the bubble bursting. … The economists called the dot-com implosion perfectly, but they called it in 1997 before those stocks went up another 30 or 40%. So, do we know they’re going to come down? Yeah, the hard part is figuring out when.” As Sorkin told Stahl, “This is either a gold rush or a sugar rush and we probably won't know for a couple of years which one it is.”

Even Sam Altman, the OpenAI CEO, has warned that investors are “overexcited.” Carroll reports, “He told an audience in August 2025 that markets are racing ahead of reality — and that the hangover always comes when money floods in faster than the technology can justify. ‘When bubbles happen, smart people get overexcited about a kernel of truth,’ he said — and in his view, AI is in exactly that phase. As signals go, his comments are closer to a siren than a soothing hum.”[6] Many analysts note that the current AI bubble involves too much circular investment (i.e., chipmakers investing in companies that purchase their AI chips).

Look for Value Creating Use Cases

We all know that winners emerged from the dot.com bubble and the same will be true of AI era — whether or not it’s a bubble. The secret is to understand where value is being created. As I noted in another article, “The earnings game has fundamentally changed, and most companies haven't figured it out yet.”[7] In that article, I pointed out that companies meeting market expectations are rewarded (not surprising) but they weren’t rewarded well (receiving only a modest +1.5% bump). On the other hand, companies failing to meet market expectations were hammered with an average -10% stock decline, more than double the historical average of -4.5%. As I noted, “It's a fundamental shift in how markets value predictability versus surprises. Investors are no longer rewarding companies for exceeding quarterly expectations. They're penalizing any sign that leadership can't accurately forecast their own business. … The companies winning today aren't the ones posting the biggest gains. They're the ones demonstrating they can precisely predict and control their outcomes through dynamic enterprise resilience.”

Artificial intelligence systems that can help companies achieve enterprise resilience will be the winners regardless of whether the current AI boom turns out to be a bubble. AI is essential in helping companies accurately wargame scenarios, stress-test assumptions, and build systems that adapt faster than market volatility. As a recent academic paper notes, “Widespread enthusiasm [for AI] is tempered by persistent execution gaps: surveys reveal that only a minority of deployments move beyond experimental pilots into scaled, revenue-impacting applications.”[8] Nevertheless, the study concludes, when executed successfully, “AI becomes a genuine source of competitive advantage.”

When your AI can't tell the difference between a reliable forecast and an educated guess, every strategic decision becomes a gamble. This is why a hybrid approach to AI, which combines generative AI with high-dimensional, explanatory mathematics and optimization techniques, enables reliable reasoning and decision-making at a massive scale. Companies that embrace the right kind of AI systems — systems that help them navigate tomorrow’s unsettling conditions — will survive any market correction. The future belongs to organizations that can rapidly adapt to changing market conditions, predict with precision, and make decisions with confidence.

Footnotes

[1] Stephen DeAngelis, “The Rise of A.I. Is Not Like the Dotcom Bubble,” Enterra Insights, 23 July 2024.

[2] Lesley Stahl, “AI boom propping up economy as some guardrails are coming off, journalist Andrew Ross Sorkin warns,” 60 Minutes, 12 October 2025.

[3] Joseph Zeballos-Roig, “The AI boom echoes the '90s dot-com bubble, IMF says,” Quartz, 14 October 2025.

[4] Shannon Carroll, “Is the AI boom actually a bubble? Here’s what analysts are saying,” Quartz, 15 October 2025.

[5] Bruce Mehlman, “Six-Chart Sunday – On Bubble Watch,” Bruce Mehlman's Age of Disruption, 19 October 2025.

[6] Shannon Carroll, “Is the AI boom actually a bubble? Here’s everything you need to know,” Quartz, 15 October 2025.

[7] Stephen DeAngelis, “81% of companies beat earnings this quarter,” LinkedIn, September 2025.

[8] Yu Shi, Tong Wu, Chuan Qin, and Bailu Liu, “The value-creating potential of AI: A multi-dimensional analysis of effects and mechanisms,” The International Review of Financial Analysis, 16 October 2025.