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Fri, November 14, 2025JPMorgan Warns AI Mania May Mirror the Dot-Com Bubble
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Published in Stocks and Investing on Sunday, November 16th 2025 at 4:15 GMT by Business Insider- 🞛 This publication is a summary or evaluation of another publication
- 🞛 This publication contains editorial commentary or bias from the source
JPMorgan warns that the “AI mania” may be headed for a classic dot‑com‑style bubble
In a late‑November release, JPMorgan’s research team cautioned that the exuberance surrounding artificial‑intelligence (AI) stocks could be symptomatic of a broader technology bubble, echoing the frenzy of the late‑1990s dot‑com boom. The firm’s analysis – which was highlighted in a Business Insider feature – argues that while the AI sector is undeniably transformative, many of the high‑profile names riding the wave are overvalued and could be primed for a sharp correction in the coming years.
1. Why the AI market feels “bubble‑ish”
JPMorgan’s research note, titled “AI Mania – Is the Sector Heading for a Dot‑Com‑Style Correction?”, points to a handful of structural concerns:
| Issue | JPMorgan’s Take |
|---|---|
| Valuation compression | Many AI‑focused companies are trading at 20–30× forward earnings, far above the long‑term tech median of 15–18×. This is reminiscent of the 2000‑peak valuations of companies like AOL and CompuServe. |
| Limited cash flow | Even the largest players (e.g., NVIDIA, Microsoft, Meta) have cash‑flow timelines that lag the pace of revenue growth. If earnings fail to keep up with hype, the price premium could evaporate. |
| Over‑optimistic monetization narratives | Generative AI is still largely a “product” rather than a profitable business model. JPMorgan notes that many analysts have projected revenue from AI services too early, ignoring the cost of data, compute, and compliance. |
| Macroeconomic headwinds | Rising interest rates and a tightening monetary policy squeeze the cost of capital, making the steep P/E ratios less defensible. The firm argues that a prolonged period of high rates could force a valuation reset. |
The article links to JPMorgan’s full research note, which offers a side‑by‑side comparison of AI‑related P/E multiples versus the broader S&P 500, as well as a chart of AI ETF performance versus the index. The visuals underscore the point that AI assets have outperformed for roughly 18 months, but that the outperformance is largely priced in.
2. The “dot‑com” analogy in practice
JPMorgan’s senior analyst, David S. Smith, explicitly draws the line between the current hype cycle and the late‑1990s frenzy. He explains that the “AI bubble” is being fueled by a combination of media hype, corporate earnings reports, and the narrative that generative AI is a ubiquitous, next‑gen platform—just as the late 1990s narrative was that “the internet is the future of commerce.”
“Investors were dazzled by the idea that a single technology could revolutionize every industry. The same logic is driving enthusiasm for AI today,” Smith writes. “The challenge is that the underlying fundamentals have not yet matured to support the price levels we’re seeing.”
He cites historical data: in the 1995‑2000 bubble, the NASDAQ climbed more than 400% before the crash. While JPMorgan does not predict an identical magnitude, it warns that if the correction is triggered, it could be substantial and would likely affect AI stocks as a whole, not just the “bubble” companies.
3. Who’s most exposed?
JPMorgan breaks down the AI sector into three clusters:
- Chipmakers & infrastructure – NVIDIA, AMD, ASML
- Software & platforms – Microsoft, Alphabet, Salesforce, Oracle
- Generative‑AI startups – Anthropic, Cohere, LLaMA (Meta’s open‑source model)
The note flags that chipmakers and software platforms, though essential to AI, have more diversified revenue streams and could weather a broader correction better than pure‑play generative‑AI startups, which are heavily dependent on future product adoption.
The Business Insider piece links to a sidebar featuring a table that ranks these companies by market cap, revenue growth, and valuation multiples. It highlights that the startup segment is where valuation compression is greatest—some companies are trading at 50× forward earnings—raising JPMorgan’s alarm bells.
4. Potential timelines and investor action
JPMorgan does not pin a specific date for the correction. Instead, it proposes a staged view:
| Phase | What to Expect | JPMorgan’s Guidance |
|---|---|---|
| Near‑term (12–18 months) | Minor price adjustments; increased volatility | Watch earnings season for any “beat‑or‑miss” surprises. |
| Mid‑term (18–36 months) | Possible broader correction across AI names | Consider reducing exposure to high‑PE generative‑AI companies; increase cash or defensive positions. |
| Long‑term (3+ years) | AI fundamentals become clearer; new revenue streams | Re‑engage in AI plays that have proven business models (e.g., NVIDIA’s GPU dominance). |
The article includes a chart that overlays the S&P 500’s trajectory with a composite AI index over the past 18 months. The visual shows the AI index having outpaced the broader market, but the narrative cautions that “past performance does not guarantee future results.”
JPMorgan also advises against “shorting” AI stocks outright; it emphasizes that a measured, long‑term view is more prudent given the potential for fundamental upside as the technology matures.
5. Bottom line for investors
- Stay skeptical of valuations: High P/E ratios are unsustainable if earnings don’t catch up.
- Diversify: Avoid pure‑play generative‑AI names; consider more established tech firms that are benefitting from AI as a catalyst.
- Watch macro signals: Rising rates and inflation may trigger a market correction that could hit AI stocks hardest.
- Long‑term upside remains: While a correction is possible, AI is still a core growth engine for many companies.
The Business Insider article ends with a reminder that history often repeats itself: the dot‑com bubble’s collapse did not mean that the internet was dead, it simply meant that the market had to re‑price expectations. JPMorgan’s message is that investors in the AI space should keep their eyes on fundamentals while acknowledging that a bubble‑like correction could be on the horizon.
Read the Full Business Insider Article at:
[ https://www.businessinsider.com/ai-stocks-market-outlook-dot-com-bubble-prediction-jpmorgan-2025-11 ]
