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Posted: 07/13/2023 - by Sofi Nechaeva

Is the rise of AI the new 'dot com boom'?

First, what is the dot com boom?

The dot com boom of the late 1990s revolutionized the business landscape forever, bringing unprecedented growth and innovation to the technology sector. Fuelled by the increasing popularity of the World Wide Web, it was a period of rapid growth, speculation, and investment in internet-based companies. There was widespread belief that the internet would reshape traditional industries and create vast wealth.

During this period, entrepreneurs and investors saw the internet as a revolutionary platform for conducting business. However, the dot com boom eventually led to a bust. In the early 2000s, many dot com companies experienced financial difficulties and failed to meet investors' expectations. The overvaluation of these companies, coupled with unsustainable business models and a lack of profitability, resulted in a significant market correction and the dot com bubble burst! Numerous internet startups declined or closed. Jobs were lost and the tech stocks plummetted.

Dot com bubble chart

Dot com stocks reached record highs in 2000, with the NASQAD index rising five-fold in just five short years before the bubble burst, leaving most dot com stocks bust by the end of 2001.    


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Many people have speculated that the growth of AI technology could meet the same fate as the dot com boom. Let’s explore this concept a little bit further…

Artificial intelligence has made tremendous strides in recent years, paving the way for significant transformation in the way businesses run their operations. Just as the dot com boom brought forth countless internet-based startups, AI has spurred the emergence of AI-focused companies, products, and services. According to industry reports, AI investment reached record levels in recent years, with billions of dollars flowing into AI-focused companies and research projects. The market for AI technologies and applications is projected to grow exponentially in coming years, as organizations seek to leverage AI to gain a competitive edge. 

Will this seemingly exponential growth lead to an AI bubble burst? The answer is complicated…

It is worth noting that the technology sector, including AI, is subject to market dynamics and fluctuations. As with any rapidly growing market, there is a possibility of overhype and inflated valuations which could  lead to a correction in the AI market or consolidation.

However, it is also important to recognize that AI is a transformative technology with the potential to bring significant advancements in various domains. Intelligent computer programs have the capacity to revolutionize industries, create new opportunities, and drive economic growth. The long-term impact of AI is likely to be substantial, even if there may be short-term fluctuations or adjustments.

AI revenue growth chart

Rapidly growing business interest in AI technology causes AI revenues to jump from near zero to just over $30K USD in less than a decade.  


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Final verdict

AI is undoubtedly transforming industries, challenging traditional business models, and generating excitement similar to what was experienced during the dot com boom. AI has the potential to drive innovation, create new opportunities, and reshape the way we live and work.

However, it is quite likely that the AI bubble will burst. We have seen these kinds of cycles of growth and decay with almost every single technological advancement. With everything new, from the invention of trains to the introduction of fiat currency, a bust inevitably follows a boom. How long the booming period for AI will last is currently unknown. All we can say for now is that the AI market holds tremendous potential but that it is essential to approach it with a balanced perspective, mindful of both the opportunities and the challenges. The future trajectory of the AI market will depend on various factors, including technological advancements, regulatory frameworks, ethical considerations, and market dynamics. 

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