AI Bubble Crash: Are we repeating the mistakes of 2000?

As more people put their faith in the experimental AI bubble, how close is it to causing a global recession?

Throughout the 21st century, arguably, no invention has changed the way we view our digital world more than the introduction of AI, specifically large language models and AI chatbots. As our society becomes more digitized, investment in this revolutionary technology is likely to continue. However, will this investment be worth it to the consumer? Or will business repeat the same mistakes we made during the past crashes? 

According to Sam Altman, CEO of OpenAI, the company that created ChatGPT, he views AI as an economic bubble, stoking growing fears over investment in AI.

“Are we in a phase where investors as a whole are overexcited about AI? My opinion is yes. Is AI the most important thing to happen in a very long time? My opinion is also yes,” said Altman –during a dinner with a small group of reporters– when asked about the AI bubble.

Other tech billionaires, like Bill Gates, have called attention to AI possibly being a dead investment, “Absolutely, there are a ton of these investments that will be dead ends," said Gates during his appearance on CNBC's "Squawk Box" on Nov 1st, 2025, comparing AI to the dot-com bubble.

Investment in AI is growing extensively, with the Stanford Institute for Human-Centered Artificial Intelligence reporting that AI corporate investment has reached 253 billion dollars. Through all this investment, AI is now creating a major fear for several tech companies, and society as a whole: Is it going to be profitable to investors?

One event being compared to the current AI bubble situation is the dot-com bubble crash, which burst in March 2000 after the Nasdaq peaked. Before the crash began, billions of dollars in investments were being poured into every company that had “dot com” in its name. 

One major reason for the reckless overinvestment was the actions of the Federal Reserve. Through lowering federal funding rates to as low as 3% by December 1992, companies were able to borrow money at a much more affordable rate, which made it cheaper for investors to invest in these companies. 

These investments would lead to a tremendous growth in companies that carried the name “dot-com”, many of which were disorganized or borderline fraudulent. However, the capital flowing into the tech industry dried up due to government increases in interest rates in 2000. This led to an investor panic in which the same investors pouring money into dot com websites started selling all of their stocks rapidly, leading to the NASDAQ index to plummet and creating the dot-com crash. In just a two-year period, trillions of dollars devoted to dot com websites were wiped off the market. 

Both bubbles share worrying similarities, including many promises made surrounding a new technology, overinvestment, and reliance largely on consumer confidence. During the Dot-com bubble, advertisement played a huge role in boosting companies that would cause the crisis. The same is being said for AI. To encourage more investment, the AI business offers new solutions and promises to take AI to the next level, but these promises are not being backed by profit. 

“AI needs to sell,” said New Roads High School history teacher John Juelis. “ OpenAI created a solution to a problem, more people bought into the problem and offered a solution… in order to sell a product, it needs to be marketed as a problem, and that AI will be the solution to everything…”

Finally, just like in the dot-com Bubble crash, many companies have not seen any profit from investments in AI. One of the biggest companies, OpenAI, has been losing money despite heavy investments.  The Information reports that in 2024, OpenAI earned only $4 billion while losing over $5 billion.  This is an especially worrying trend that other AI companies are following. According to an MIT report, nearly 95% of all AI startup companies were failing to see returns on their investments, a dangerous parallel to the dot-com bubble fiasco. 

If an AI bubble were to occur today, it would affect the stock of the Magnificent 7, which are the seven most influential tech companies in the U.S stock market: Apple, Microsoft, Google, Amazon, Nvidia, Tesla, and Meta Platforms. Through this stock correction, we will see 401(k)s, pensions, and retirement accounts greatly affected, damaging Social Security for the middle class.

A finding done by former IMF Chief Economist ​Gita Gopinath estimates that an AI bubble burst, similar to the dot-com crash, could erase $20 trillion from American households, significantly affecting the average American. 

At the same time, many still claim that AI has changed the world for the better and that the world is prepared for an AI future. “AI could create new industries and types of roles, and help enhance workers’ ability to learn and implement new skills,” Sam Altman said to reporters when asked about the technology. 

However, only time will tell if AI will bring about a technological revolution that will usher America into a new age of prosperity or serve as another nail in its coffin.