Season 8 - Episode 24: When Money Goes in Circles: Lessons from Dot-Com for the AI Boom

Is the AI boom the next dot-com bust?

While billions pour into AI startups and tech giants race to dominate the space, troubling patterns are emerging that echo the late 1990s—circular funding loops, sky-high valuations with little revenue, and a dangerous concentration of capital in just a few players.

In this episode, Chris and David dig into the warning signs that separate a genuine technological revolution from a market bubble ready to pop. They examine OpenAI's alarming cash burn rate—massive sales but vanishing profitability—and why inflated AI valuations should concern anyone watching the market. Drawing direct parallels to the dot-com crash, they explore how low interest rates may be fueling reckless investment, why extreme market concentration in AI stocks poses systemic economic risks, and how the interconnectedness of global markets could amplify any downturn.

Takeaways

• The AI market is experiencing significant growth, but concerns about a bubble exist.

• Historical indicators from the dot-com era can help predict potential market busts.

• Valuation metrics for AI companies are currently inflated, raising red flags for investors.

• OpenAI's cash burn rate is alarming, with high sales but low profitability.

• Market concentration in AI stocks poses systemic risks to the economy.

• The potential for AGI could change the landscape of tech investments dramatically.

• Investors should be cautious of excessive hype and retail investor behavior.

• Low interest rates may encourage reckless investment in AI companies.

• The interconnectedness of global markets increases the risk of a widespread downturn.

• Monitoring insider selling and financing terms can provide insights into market health.