The AI Bubble Is Starting to Look a Lot Like the Dot-Com Crash

Last week, eco-friendly footwear company Allbirds shocked investors by selling off its physical business to American Exchange Group for around $39 million and then announcing plans to pivot their focus to Artificial Intelligence (AI). The remaining public entity immediately raised $50 million in financing from an unidentified investor to invest in GPUs and rebrand as NewBird AI.

In their press release, they declared their long-term goal to become a "fully integrated GPU-as-a-Service and AI-native cloud solutions provider." Within a day, their shares surged 600%, peaking at $21–23 before settling around $3 prior to the news. This move has many observers recalling the infamous dot-com bubble, with some drawing parallels to the blockchain-era Long Island Iced Tea Corp.'s name change, which saw its stock skyrocket 500%, despite having no actual connection to the tech.

As we witnessed during the dot-com bubble's peak, when the Nasdaq surged by 600% from 1995 to its March 2000 high, and price-to-earnings ratios reached an unsustainable 200, AI's current valuation seems equally inflated. Companies without revenue or profit were receiving billion-dollar valuations based on mere hype and buzz. The similarities extend to the pattern of investors experiencing FOMO (fear of missing out), resulting in a wave of latecomers who are left with worthless investments.

While the internet eventually flourished, despite its missteps, AI's future is not yet clear. The same cautionary tale applies: while groundbreaking technologies can reshape the world, speculative bubbles can just as easily burst, leaving investors and the broader economy in ruins.