/AI%20(artificial%20intelligence)/Data%20Center%20by%20Caureem%20via%20Shutterstock%20(2).jpg)
More than 25 years have passed since the dot-com crisis, but its ghost still lingers. As swings in the S&P 500 and Nasdaq futures reflect growing uncertainty, many investors fear that history could repeat itself, this time with AI, potentially dragging down tech giants like Alphabet, Amazon, Meta, Microsoft, and others, and putting prolonged pressure on broader equity indices.
At the same time, some argue that the current situation is fundamentally different.
In particular, the demand for AI is real and backed by corporate spending. Unlike the dot-com era, when much of the investment frenzy was fueled by cheap debt and speculative venture capital, today's investments in AI are largely financed by the huge operating cash flows of the largest tech companies, significantly reducing financial risk. During the dot-com bubble, by contrast, much of the investment was based on circular financing and heavy leverage, which ultimately contributed to the collapse.
They also say that valuations don’t look extreme. While much of the S&P 500’s recent gains have been driven by a handful of AI-focused tech giants, the index’s forward P/E remains below dot-com bubble levels and even below the peaks seen in late 2020. In other words, the market may be expensive, but it’s not overheated by historical standards.
That sounds reasonable, but things are getting more complicated.
For example, on Monday, Alphabet issued $20 billion in dollar-denominated debt, and on Tuesday it tapped the European market to raise roughly $11 billion in sterling and Swiss francs. These deals increased Alphabet’s gross debt by about 47%, following a 2.4× rise earlier in 2025. Now, although the company’s net debt remains negative, with planned capital spending of around $180 billion this year, the balance sheet could come under more pressure.
The broader AI narrative is also entering a new phase. Speculation surrounding a potential OpenAI IPO has added both excitement and anxiety. For some, it signals AI’s maturation; for others, it echoes past cycles where landmark listings marked the peak of market euphoria rather than a new beginning.
Regarding AI’s real-world impact, the technology was supposed to reduce workloads and let employees focus on more valuable and creative tasks. In practice, recent Harvard research suggests the opposite: AI often increases work. Employees take on more tasks, expand their responsibilities, and end up working longer hours.
In summary, although the situation may differ from the dot-com bubble, last week’s sell-off after earnings reports, including Amazon’s, suggests that investors are starting to question whether these multi-billion-dollar AI investments will really pay off. If companies fail to deliver good news in the next earnings reports, we could see even deeper pullbacks.
/Microsoft%20sign%20at%20the%20headquarters%20by%20VDB%20Photos%20via%20Shutterstock.jpg)
