As artificial intelligence transforms industries and attracts unprecedented investment, some analysts are beginning to draw parallels between today’s AI boom and the dot-com frenzy of the late 1990s. While the technology’s long-term potential is unquestionable, its rapid commercialisation, speculative valuations and crowded venture capital space are prompting questions about whether an economic correction is inevitable.
A surge driven by hype and capital
In the past two years, AI has shifted from a niche innovation to a global economic engine. Companies in nearly every sector — from finance and healthcare to logistics and entertainment — are integrating generative tools and predictive systems. Yet behind the enthusiasm lies an extraordinary surge in capital inflows.
Venture funding for AI startups exceeded $120 billion globally in 2024, with valuations frequently detached from revenue performance. Publicly traded AI companies have also soared: Nvidia’s market value more than tripled in two years, and firms with even a vague connection to AI have seen share prices spike purely on association.
Economists warn that this exuberance bears striking resemblance to the internet bubble two decades ago, when investors poured money into every company with “.com” in its name, only for many to collapse once profitability proved elusive.
Echoes of the early internet era
The similarities extend beyond valuations. Both periods were marked by revolutionary technologies that promised to reshape human life, yet whose commercial models were still forming. In the late 1990s, web infrastructure was immature, online advertising untested, and e-commerce logistics unreliable. Today, AI faces its own structural challenges: high computational costs, limited regulation, unclear intellectual property frameworks and growing public unease over data use.
Dr Maya Chen, a technology historian at Oxford University, notes: “The parallels are strong — transformative promise, speculative capital and a gap between aspiration and execution. But unlike the dot-coms, AI does have clear productivity applications. The question is not whether AI will survive, but how many of today’s players will.”
A market ripe for consolidation
Analysts expect that as the initial excitement fades, the sector will experience a consolidation wave. Many small or overvalued startups may fail or be acquired by larger firms able to bear the cost of computing power and regulation. Meanwhile, established technology giants are positioning themselves to dominate the ecosystem — building proprietary models, securing chip supply chains and embedding AI deeply into existing services.
This phase, experts argue, will separate sustainable innovation from speculative hype. The survivors, much like Amazon and Google after the dot-com crash, could become the defining corporations of the next decade.
Risk, regulation and resilience
A key difference from the 1990s is scale. The AI economy is already integrated into national productivity strategies, defence systems and healthcare planning. Governments are moving to regulate it, but global coordination remains weak. Should valuations collapse suddenly, the consequences could ripple far beyond technology stocks — affecting employment, energy demand and even geopolitical stability.
Investors, regulators and consumers alike now face a delicate balance: nurturing an innovation that may define the century while guarding against the excesses that could destabilise it.
Whether AI proves to be another bubble or the foundation of a new industrial era will depend not on the speed of its rise, but on how wisely the world manages its growing power.
Newshub Editorial in Europe – 21 October 2025
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