Over the past month, major market indices have been hitting all-time highs almost every day. The news often makes this seem more dramatic than it actually is. The S&P 500 has hit roughly 31 all-time closing highs so far in 2025. To put this in context, the S&P 500 was trading around 1,500 in the year 2000. Today, it sits around 6,730. There have been many all-time highs during that 25-year stretch. The year 2000 was particularly interesting because the market was booming until the dot-com bubble popped, causing a 49% decline from its peak. Recently, I have been hearing more and more about the dot-com bubble. Some economists are now warning about a potential “AI bubble.” It is an interesting concept worth exploring, so let’s break it down.
Artificial Intelligence Historic Run
The recent surge in AI represents perhaps the most advanced technological and financial waves since the dot-com era. AI can handle repetitive tasks, boost efficiency, cut costs and analyze data instantly. With this new technology, investors wanted to be a part of it. Large tech companies have jumped on this train and are investing heavily to implement AI in their respective companies. Investors who got in early have enjoyed unprecedented market returns. When a new wave of technology presents itself, there is going to be a flock of people trying to get in on this before it is too late. That is where many of the AI startups come from. Some of them may turn into great companies while others may go out of business. We are likely only in the second or third inning of what AI is capable of achieving.
Dot-Com Vs. AI
There are many similarities and differences between the dot-com bubble and the recent AI run. To properly assess whether we are in the middle of a bubble, it is important to look at a similar situation from 25 years ago. I did not experience this bubble as a financial advisor or even as an investor. However, my dad, Billy, was about five years into his career as a money manager. He has told me stories about what a difficult time it was. The dot-com bubble was formed by internet companies that were building websites, portals, e-commerce platforms, etc. Most of them had…
