The dot.com bubble burst 25 years ago this month. Could AI be next?

A revolutionary new technology comes along and infatuates investors with its seemingly limitless possibilities.

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SAN FRANCISCO - Euphoria sparks a stock market rally. Eventually, things get overheated and share prices become ridiculous. Then it all collapses.

Does this sound familiar? It happened exactly 25 years ago when the roughly five-year dot.com bubble popped, leaving trillions of dollars of investment losses in its wake. On March 24, 2000, the S&P 500 Index posted a record level it would not see again until 2007. Three days later, the tech-heavy Nasdaq 100 Index also closed at an all-time high, the last time it would do that for more than 15 years.

Echoes of that era are now reverberating. The technology this time is artificial intelligence (AI). After a wild stock market rally that sent the S&P 500 soaring 72 per cent from its trough in October 2022 to its peak in February, adding more than US$22 trillion (S$29 trillion) of market value in the process, signs of trouble are emerging. Stocks are starting to sink, with the Nasdaq 100 losing more than 10 per cent to fall into a correction and the S&P 500 briefly dropping to that level. And the symmetry is raising frightening memories from a quarter century ago.

DIFFERENCE OF DEGREES The main difference between the dot.com and AI eras, however, is a matter of degrees. The most recent boom has been eye-popping, but it pales in comparison to the extremes of the internet bubble.

"The internet was such a big idea, had such a transformative impact on society, on business, on the world, that those who played it safe generally got left behind," said Mr Steve Case, the former chairman and chief executive of America Online (AOL). "That leads to this kind of focus on massive investments to make sure you're not left behind, some of which will work, many of which won't work."