The rise of AI: Boom, bubble or neither?

"Artificial Intelligence" became an everyday phrase in 2025, with generative AI tools spreading rapidly across offices, classrooms and consumer products.

- By Sreedev Krishnakumar

That pace of adoption has been matched by extraordinary investor enthusiasm, driving funding, valuations and markets across the globe. The question now is whether this reflects the early stages of a durable technological shift, or a bout of exuberance running ahead of fundamentals.

A familiar surge

In the 1990s, the listing of Netscape marked the moment the internet became investable, setting off a sharp rally in the Nasdaq as investors tried to price a poorly understood future. This ended with the "dotcom bubble" bursting in 2000. The public launch of ChatGPT on November 30, 2022, may be a similar starting point. The Nasdaq has risen strongly since, driven by the belief that AI will power the next phase of technology-led growth. To be sure, part of the AI hype is the result of the fact that the firms investing in it are already highly profitable. Unlike the dotcom bubble, the hype is also driven by already established companies rather than startups with nothing to show.

AI now dominates funding flows