According to the famous economist, the artificial intelligence bubble is about to burst: "It could be even worse than dot-com."

For years, some experts have warned that the AI industry has become a massive bubble, one that could eventually burst due to excessive expectations. These warnings have become increasingly louder recently. Torsten Slok, chief economist at Apollo Global Management, wrote on the company's blog that the current AI bubble is becoming even more dangerous than the dot-com crash of the late 1990s. "The difference between the bubble of the 1990s and today's AI bubble is that the top 10 companies in the S&P 500 are significantly more overvalued today," Slok wrote.

WHAT IS THE DOT-COM BUBBLE?

The dot-com bubble was a major financial speculation and market crash that occurred in the late 1990s and early 2000s, caused by the overvaluation of internet companies. The bubble's name comes from the fact that most internet companies launched at the time had ".com" domain names. Between 1995 and 2000, investors, overconfident in the potential of internet technologies, invested in companies in this sector with excessive optimism. While startups attracted billions of dollars in investment without even needing to turn a profit, companies simply went public with ".com" and achieved enormous market capitalizations. The media and analysts further fueled this trend with their optimistic rhetoric. Many dot-com companies increased their expenses much faster than their revenues, attracting more investment as they incurred losses. When it became clear that the companies weren't delivering the profitability they had promised, investors began selling their shares rapidly. Ultimately, the NASDAQ, the US technology exchange, lost approximately 80 percent of its value within two years of reaching its peak in March 2000. Hundreds of billions of dollars in investment evaporated, and the economic recession of 2000-2002 was witnessed. Many small companies disappeared from the market.

The value of companies like Amazon also fell rapidly, but they managed to survive in the following period.

ARTIFICIAL INTELLIGENCE PROFITS STAY STILL

According to Slok's analysis of artificial intelligence companies, the price/earnings (P/E) ratios of the 10 best-performing companies in the S&P 500 index have risen significantly above the levels seen in the 1990s. This ratio indicates how high a company's share price is relative to its earnings. In other words, while companies' market capitalization is rapidly increasing, their revenues are not. Leading the way in this trend are Nvidia, which produces artificial intelligence chips, followed by Microsoft, Apple, Amazon, Meta, and Alphabet (Google's parent company). These giants have gained weight in the index by investing billions of dollars in AI. However, analysts say these investments are still not turning into profits, and some tech giants have even begun to cut spending, as the gap between spending and revenue is widening.

WARNING HAS BEEN COMING SINCE 2023

Slok's statement isn't a new warning. Even in 2023, when ChatGPT was in its early months, many analysts were already pointing out the "overinvestment in unproven technologies." Speaking to Futurism, AI analyst Ed Zitron likened the situation to the 2007 subprime mortgage crisis, which crashed the US housing market and triggered a global economic crisis. Earlier this year, when Chinese AI company DeepSeek introduced a chatbot trained with significantly less hardware power and capable of competing with models like ChatGPT, tech stocks lost over $1 trillion. This incident exposed the fragility of the AI market.

WHERE IS THE TRAVEL?

While tools like ChatGPT and Google Gemini have gained popularity worldwide, revenues still lag far behind the tens of billions of dollars invested in data centers. According to an S&P Global study published in June, the generative AI market is expected to reach a total volume of $85 billion by 2029. It has yet to be proven that tech giants will be able to reap the rewards of their massive investments in AI.