Boom or Bubble?

Sky-high valuations raise fears of Al exuberance, but experts say discipline can prevent a dotcom-style collapse

- Naini Thaker

Is artificial intelligence (AI) having its dotcom moment? If industry experts and stakeholders are to be believed, the latter is quite likely. And if that happens, every company will be affected, Sundar Pichai, CEO of Google, said in an interview. “No company is going to be immune, including us,” he said.

In late October, Nvidia briefly achieved the remarkable feat of becoming the first company to surpass a market capitalisation of $5 trillion. This serves as a stark reminder of the unprecedented concentration of this boom within the AI infrastructure sector. Alphabet joined the $3 trillion club in September, buoyed by a favourable antitrust ruling that ruled out a breakup of the company, and surging investor confidence in its Gemini AI roadmap.

However, November's stock sell offs wiped tens of billions off AI-linked names, with AI software company Palantir Technologies suffering its worst month in two years (stock dropped approximately 16 percent in November) and Nvidia retreating after a record run (fell approximately 12.6 percent).

This has revived an old question: Is this AI exuberance rational, or are we replaying the dotcom bubble of 1999-2000?

ECHOES OF THE DOTCOM BUBBLE

Pichai agreed during an interview with BBC that, while the growth of AI investment had been an “extraordinary moment”, there was some “irrationality” in the current AI boom. He acknowledged that AI will be as transformative as the internet, but history shows that transformative technologies often come with speculative bubbles.