{"id":186504,"date":"2025-11-24T12:43:55","date_gmt":"2025-11-24T12:43:55","guid":{"rendered":"https:\/\/teknomers.com\/en\/we-invest-in-ai-as-if-it-has-already-succeeded-just-like-we-did-in-1999\/"},"modified":"2025-11-24T12:43:57","modified_gmt":"2025-11-24T12:43:57","slug":"we-invest-in-ai-as-if-it-has-already-succeeded-just-like-we-did-in-1999","status":"publish","type":"post","link":"https:\/\/teknomers.com\/en\/we-invest-in-ai-as-if-it-has-already-succeeded-just-like-we-did-in-1999\/","title":{"rendered":"We Invest in AI as if It Has Already Succeeded: Just Like We Did in 1999"},"content":{"rendered":"\n
\n

The expectation and unbridled optimism about the AI revolution is giving way to a stage of nervous laughter. The question is no longer whether there is an AI bubble, but when it will burst and what impact that burst will have. It is inevitable to compare this situation with the one we experienced with the rise of the internet and the dotcom bubble, but this is even worse.<\/p>\n

Dog Years, Mouse Years<\/h2>\n

Vinton Cerf, one of the fathers of the internet, spoke in 1999<\/a> about how “a year in the internet business was like a dog year, that is, seven years in the life of a normal person.” Back then, everything was moving quickly, yet today’s pace is likened to “mouse years”\u2014equating each year in AI to about 35 human years<\/a>. This rapid transformation presents significant dangers.<\/p>\n

Stock Market Crashes Don’t Help<\/h2>\n

Until a month ago, optimism in the tech market had propelled major companies to rapid growth, but recent trends show a decline. Stocks such as NVIDIA (-4%), Microsoft (-10%), and Meta (-20%) are just a few examples of how quickly the tide has changed, with only Google (+15%) and Apple (+3%) maintaining some stability amidst the downturn.<\/p>\n

The Bubble is Huge<\/h2>\n

The projected capital expenditures (capex) and venture capital investments in AI are set to exceed $600 billion by 2025. According to Gartner, AI-related spending will reach $1.5 trillion<\/a> in 2025, escalating from $988 billion in 2024. By 2026, estimates suggest it will surpass $2 trillion.<\/p>\n

Growth at an Alarming Rate<\/h2>\n

Analyst Fred Vogelstein notes that this spending is happening in a fraction of the time it took for the internet bubble to inflate, which lasted about 4.6 years before bursting. The AI bubble is inflating at a much faster rate, which is a significant warning sign.<\/p>\n

Concentration of Investment<\/h3>\n

Unlike the dotcom bubble, where venture capital thrived, much of today’s substantial investment in data centers stems from the tech giants themselves. However, this concentration poses risks; companies like Microsoft, Alphabet, Meta, and others account for a huge portion of the S&P 500. Their decline could have severe repercussions for the economy.<\/p>\n

This is Not an Investment, It’s a Bet<\/h2>\n

Leading companies are taking risks with projected capital expenditures of $70-$100 billion. Mark Zuckerberg exemplified this mentality by stating:<\/p>\n

“We’re going to invest aggressively. Even if we lost a couple hundred billion dollars, it would be a bummer, but it’s better than being left behind in the race for superintelligence.”<\/p><\/blockquote>\n

OpenAI: The Bubble Paradigm<\/h2>\n

OpenAI, valued at $500 billion, exemplifies the AI frenzy. Despite projecting significant losses in “cash burn,” it anticipates profitability only by 2029. The financial outlook raises questions about sustainability.<\/p>\n

Circular Financing<\/h3>\n

Many technology firms are engaging in circular financing agreements, which resemble a self-reinforcing cycle of dependency. Oracle, for instance, has issued $18 billion in bonds<\/a> and increased its total debt above $100 billion.<\/p>\n

Disturbing Trends in Startup Valuation<\/h2>\n

The frenzy extends to AI startups, with some like Reflection AI securing funding rounds exceeding $2 billion. Meanwhile, Safe SuperIntelligence is valued at $32 billion despite lacking public products.<\/p>\n

Warnings from Tech Leaders<\/h2>\n

Even industry leaders like Pichai, Nadella, and Altman express concern about an impending burst. Baidu’s Robin Li noted that we might witness only 1% of AI companies surviving this bubble.<\/p>\n

The Impacts of Global Competition<\/h2>\n

The excessive spending in AI is not solely a U.S. phenomenon; China is also playing a significant role, creating uncertainties tied to national security concerns and regulatory unpredictability.<\/p>\n

But This Bubble is Not Like the Others<\/h2>\n

While signs of a bubble are evident, comparisons to the dotcom bubble should be made cautiously. The Nasdaq index grew 281% three years before the dotcom burst, while its growth related to AI stands at just 100%. Additionally, current valuations, though high, are not unprecedented.<\/p>\n