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AI stock euphoria: Is this another 2000 dot-com bust in the making?

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  Published in Stocks and Investing on Friday, September 5th 2025 at 9:02 GMT by Fox Business
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AI‑Driven Stock Euphoria: A New Dot‑Com‑Style Bubble on the Horizon?

The recent surge in technology stocks fueled by the rise of artificial intelligence has drawn sharp comparisons to the 1990s dot‑com frenzy. Fox Business’s in‑depth coverage, “AI stock euphoria: This another 2000 dot‑com bust in the making,” lays out the story of how a handful of AI‑heavy companies—Nvidia, Microsoft, Alphabet, Amazon, and Salesforce—have catapulted to record valuations, sparking both fanfare and alarm among investors, analysts, and policymakers.

1. The Catalyst: From Pandemic to “Generative AI”

The article begins by tracing the roots of the current wave back to the COVID‑19 pandemic, which accelerated the shift to cloud, remote work, and data‑driven decision‑making. However, the tipping point came in late 2022 and early 2023, when generative AI models like OpenAI’s ChatGPT and Google’s Gemini gained mainstream attention. These models, powered by massive neural networks and unprecedented data sets, demonstrated the potential to automate complex tasks, from content creation to coding and customer support.

The mainstream press and Wall Street quickly linked these breakthroughs to real‑world economic value. “AI isn’t just a technology; it’s a new way of doing business,” the piece notes, citing an interview with a leading AI economist. The narrative was simple: companies that could harness AI would unlock new revenue streams, reduce costs, and achieve economies of scale.

2. The Titans of the AI Boom

The Fox Business article spotlights five companies that have become the face of the AI narrative:

The piece emphasizes how Nvidia, in particular, has become the “glut‑to‑the‑bargain” symbol of AI hype. Its stock price has risen more than 200% since the beginning of 2023, largely driven by demand for GPUs that accelerate training and inference for large language models. Yet, the article points out that Nvidia’s valuation now exceeds the average price‑to‑sales ratio of the entire S&P 500 by more than four times.

3. A Bubble, or a Catalyst?

Fox Business includes interviews with several Wall Street analysts, each offering a different take on the sustainability of these valuations. Some, such as a senior research analyst at Goldman Sachs, warn that “AI‑related valuation multiples may be unsustainable if the technology fails to produce the promised productivity gains.” They cite historical precedents: during the 1999 dot‑com boom, many tech companies had price‑to‑earnings ratios above 100×, only to collapse when their business models failed to deliver cash flow.

Other voices, such as an AI venture capitalist, argue that the current surge is merely the first wave of a broader, multi‑decade transformation. “If AI is the next industrial revolution, the stock market is simply pricing in the future,” the VC said. The piece also references a Fox Business‑sponsored panel discussion on the “Future of AI and the Stock Market,” where experts agreed that AI will create new industries but also that investors must temper expectations with a realistic assessment of costs and competition.

4. Linking to Deeper Insight

The article links to several other Fox Business pieces that provide additional context:

1. “Nvidia’s GPU Demand and the AI Boom” – a data‑heavy report that explains how supply constraints (e.g., chip shortages) and a rapid increase in AI workloads are inflating the company’s price‑to‑sales ratio. The report highlights Nvidia’s recent announcement of a new 5nm GPU line that could help alleviate supply bottlenecks but will take 12–18 months to scale.

2. “How AI Is Reshaping the Cloud Market” – this piece profiles Microsoft and Google’s cloud AI strategies, comparing their pricing models and AI service adoption rates. It notes that Microsoft’s Azure AI services have seen a 35% YoY increase, while Google’s Vertex AI has a 28% YoY increase. The article also discusses potential regulatory challenges in the EU and U.S., where governments are beginning to scrutinize AI data usage.

3. “Is the Dot‑Com Bubble a Warning for Today’s AI Rally?” – an op‑ed that argues the dot‑com collapse was partly caused by over‑optimistic expectations about internet monetization. The op‑ed suggests that a similar pattern could emerge if AI companies overpromise and underdeliver.

These linked pieces underscore the depth of analysis the Fox Business team has undertaken to contextualize the AI stock rally within broader economic and regulatory trends.

5. Risk Factors: Interest Rates, Inflation, and Corporate Margins

The article stresses that rising U.S. interest rates could compress high‑growth valuations. The Federal Reserve has signaled a steady climb in rates to combat inflation, which can lead to higher discount rates for future earnings. The piece includes a brief analysis of how a 50 basis‑point hike could reduce Nvidia’s intrinsic value by 15–20% based on discounted cash‑flow models.

Another risk highlighted is corporate margin compression. AI projects often require significant upfront investment in data centers, research, and talent acquisition. “The cost of running large language models is not trivial,” the article notes. For instance, OpenAI’s estimate of operating costs per inference is roughly $0.05, which can erode margins if not offset by high usage.

6. Potential Outcomes: Correction, Consolidation, or Transformation

Fox Business offers a balanced outlook on what could happen next. A steep correction would likely be triggered if AI’s productivity gains do not materialize as quickly as projected. In that scenario, the market would reassess the viability of “AI as a growth engine” and the valuation multiples of the involved companies.

Alternatively, the article posits that a moderate correction followed by a consolidation phase could help the market filter out the hype. This would create a more sustainable foundation for AI companies to scale. The piece also points out that “AI is a technology that is still in its early days,” and that a slower but steadier path could emerge, akin to the post‑2002 internet market where many companies evolved into robust, revenue‑generating entities.

7. Bottom Line

The Fox Business article concludes by urging investors to approach AI stocks with caution and to look beyond headline numbers. While the potential of generative AI to reshape entire industries is undeniable, the current valuations—particularly those of Nvidia and Salesforce—may well be over‑extended, mirroring the unsustainable exuberance of the 1999 dot‑com bubble. The story is still unfolding, and how these companies navigate technological, regulatory, and macroeconomic headwinds will determine whether the AI surge translates into long‑term value or becomes a cautionary tale for the next generation of tech investors.